3 minute read
Vic Jannels
Now is the time for sensible and sustainable growth
Vic Jannels
CEO, ASTL
In December 2021, the value of bridging loans written that quarter reached a record £1.24bn, a 19 per cent increase on the previous quarter, and more than double the levels seen when ASTL first collected this data in December 2013. This shows the incredible rise to prominence of short-term lending from its early years.
In March 2022, we saw a fallback in the value of loans written, which dipped 15.8 per cent in comparison with the record December figure. Nevertheless, bridging continued to be a popular product, and demonstrating this, the second quarter saw loan values bounce back once more, up 17.4 per cent on the last quarter and 10.4 per cent year-on-year.
In fact, the figures show increases across the board in Q2 2022, with application values rising to £7.5bn, and loan books standing at a new high of just under £6.1bn.
Whilst there will always be fluctuations, it is clear that short-term finance is resilient and remains in high demand.
TROUBLE AHEAD?
While the popularity of short-term finance and the thriving nature of this market are certainly reasons for celebration, there is little doubt that the future holds increased uncertainty for everyone in the UK, bridging lenders included. Indeed, the data shows that the value of loans in default has also started to rise, up 31.5 per cent on Q1 2022 alone, while repossessions are also on the increase.
Growing uncertainty, bringing with it the potential for stalled property purchase chains or unexpected complications for development projects, could be a boon to the shortterm finance market, which plies its trade helping borrowers find solutions in difficult situations.
With the cost-of-living crisis worsening by the day, UK homeowners, first-time buyers, developers, and landlords are more likely than ever to face cash flow problems or develop a complex – even adverse – financial history, perhaps through no fault of their own. Bridging finance therefore has an opportunity to come farther to the fore and help keep the UK property market moving, which in turn is integral to economic recovery.
The other side of this, however, is the fact that this market is not immune to instability. Far from it, in fact, as lenders must be highly aware of the potential impact of current and future trends on borrowers’ exit routes. While a complex economic environment is fertile ground for short-term lending, it can also be its downfall.
Lenders need to be flexible and willing to find solutions to borrowers’ problems, yes, but they also must take a stringent, sustainable, and responsible approach, in order to avoid exit routes collapsing without a contingency plan, leaving borrowers in a worse position. project or purchase might face, particularly as we look down the barrel of a difficult economic environment. We have also learned the hard way that, much like the COVID-19 pandemic, global events and trends can emerge unexpectedly, with unforeseen effects.
That said, with a measured, commonsense approach, it is possible to provide responsible lending even during a turbulent period – something that the shortterm and specialist finance markets have proven time and again.
To its immense credit, the bridging market has come a long way since its inception, working hard over the years to build a strong and trustworthy approach to a form of finance of which some have traditionally been wary.
Our code of conduct takes this responsible ethos and cements it into a set of standards that all ASTL members commit to uphold, the first and most important of which is to act in a professional manner, with honesty and integrity, in their dealings with customers.
As the world moves on from the seismic events of the pandemic, through to the next set of challenges and struggles, the ASTL and its members are among those working hard to make sure that short-term finance is consistently able to provide a sustainable solution.
