The Chancellor’s decision to radically alter the way in which pension lump sums can be taken has been given a generally favourable welcome.
Buy-to-let specialists particularly will be rubbing their hands as the opportunity for investors with lump sums to invest outside the annuity route begin to flex their new financial muscle by looking to property as a suitable nest egg.
The effects are also likely to filter down to the bridging market and open up further opportunities for growth as the need for refurbishment, development and conversion funding grows.
A recent survey showing that redevelopment business in the market reportedly totalled £1.29bn between April 2013 and April 2014. This is almost double the previous period showing the bridging market in rude health and the growing need for short-term finance in the areas outlined will continue to provide the industry with more fuel for growth.
With the economy already flagging a move away from its reliance on a low base rate, bridging demand will be largely unaffected. The cost of funds will have an impact on headline rates. But the short-term nature of the product means that unless there are huge hikes which will affect lending market appetite overall, the transactional basis of the business is unlikely to be affected.
The bridging market is a facilitator. The growth of the refurbishment part of the sector would suggest that in the absence of other viable sources of short-term funding, the existing bridging lenders would be able to absorb rate rises without losing demand.
Any new lender looking to launch today will face an already competitive arena. Trying to bring something new to a market that has matured quickly will be a test.
With rates competitively priced and product specification unlikely to move further down the route of increasing LTVs, taking on a higher risk profile can only pique the interest of the regulator who is already taking a long look at bridging. It would be foolhardy or naive to want to try that particular path without a Plan B.