As complexity levels grow, advisers are in a prime position to drive the lending steam train rather than stoke the engine
The more specialist areas of the mortgage market have become increasingly complex recently, much of which can be put down to stronger government and regulatory influence, not to mention a challenging economic climate.
Focusing on the positives, the tightening of regulatory boundaries has helped raise standards across many areas. Some government initiatives may not have gone down well but we must all adapt to them.
There is a renewed emphasis on borrowers being fully aware of policy changes and available options. As complexity levels grow, advisers are in a prime position to drive the lending steam train, not just maintain their role as chief engine stokers.
In the more niche markets, we need advisers to be knowledgeable about, and invested in, certain product sectors. We would hope the majority recognise the obvious scenarios where bridging finance works. However, for this sector to really grow, we need that bit more.
Bridging has come a long way. Innovation, criteria changes and shifts in lending policy mean there is a far wider remit for its use. That said, this flexibility must be embraced by intermediaries for it to have a measurable impact on borrowers. Lenders and distributors have a big role in ensuring advisers are sufficiently educated on these benefits.
Thankfully, there continue to be encouraging signs for the sector as a whole. The latest Bridging Trends data shows the volume of loans rose by 11.5 per cent to £482.6m in 2016, despite a volatile year. Volume during Q1, Q2 and Q4 was found to exceed levels from 2015.
Regulated bridging business also increased, from 36.5 per cent to 44.4 per cent of all deals. This was attributed to regulatory changes and the introduction of consumer BTL.
Interest rates were under constant downward pressure last year, averaging 0.89 per cent in Q1 and 0.78 per cent in Q4. Mortgage delays continued to be the most popular reason for taking out a bridging loan. In addition, average loan terms remained consistent at 10 to 11 months and LTV ratios were steady at around 49 per cent.
These results reflect a competitive and stable market but we must be wary that this amplified competition does not fuel unnecessary levels of risk.
Average LTV ratios are at relatively comfortable levels and it is vital sensible lending practices remain. It is also important that the drive for market share does not push risk boundaries too far.
It will be interesting to see how the BTL changes affect demand for bridging finance.The tightening of lending criteria could see a rise in the use of short-term finance to complete improvement works, with BTL utilised as an exit strategy.
If January is anything to go by, we can expect more of the same activity and volume throughout the bridging sector. There remains a sense of cautious optimism. There is even talk that certain building societies are looking at the regulated bridging market.
The political arena may remain unpredictable but specialist lending sectors have demonstrated robust foundations. With increased professional standards and strides being made through intermediary engagement, we have reasons to be cheerful.