Could more firms enter the bridging loan market?
The residential property lending market is highly competitive, and some lenders are considering entering the commercial bridging loan market in order to diversify their business.
As the commercial property finance market is not as competitive as residential financing, it makes commercial lending attractive for new entrants.
According to a September 2017 BridgingAndCommercial.co.uk article, some financial experts point out that commercial bridging loan lending can be high risk and that lenders need to price their loans to take higher risk into account if they are to survive.
Over the past couple of years, there has been a number of new lenders in the bridging finance market. Not all have been successful and some have withdrawn from the market.
Lenders and brokers are used to a high standard of customer service from commercial lenders, so any new entrants need to make sure that their customer service is top class.
Many residential landlords with four or more properties face more stringent affordability tests when applying for commercial mortgages on new property purchases. They also have to pay more tax because of changes to the mortgage interest tax relief rules. Some are looking to invest in the commercial property market and this could increase the demand for both commercial mortgages and bridging finance.
Most lenders who enter the commercial market will probably continue to provide residential bridging loans as well.
If more lenders enter the commercial lending market, this means that brokers will have access to a higher choice of financial products to enable them to match their clients’ needs to the best bridging deals.