Healthy funds and good service crucial to bridging loan success
Fierce competition has sent the price of bridging loans down, meaning plenty of funds, knowledge and experience is pivotal to becoming an established lender, says finance expert Michael Perry/
In a July 2017 MortgageSolutions.co.uk article, Perry says that new entrants to the bridging market often offer high loan-to-value loans or lower interest rates in order to compete with established bridging lenders. This can make their loans less profitable and could attract customers that are more likely to default on their loans.
“Lowering rates hammers profit margins, so offering high LTVs (loan to values) to attract customers brings an increased risk of defaulting.”
Some lenders that have left the market have been described as ‘dabblers’, whose main business is not bridging finance. They were attracted to the property lending market but did not have the wide knowledge and expertise of specialist property bridging finance lenders.
Most specialist bridging lenders provide a first class service, and there is no shortage of demand for bridging loans. In April 2017, £4.2bnwas lent in bridging loans, according to a July 2017 PropertyWire.com. Most brokers have a long and good relationship with lenders they trust, meaning that they can recommend lenders and bridging deals at competitive interest rates.
Some bridging loan interest rates are at the lowest they have been in the last 18 months. This may have reduced lenders’ profits, but there is no shortage of well-funded lenders who can provide flexible and fast bridging finance.