How has bridging finance fared in 2017?
Perhaps it hasn’t fared that differently to recent years. There have been no major changes or events, and no one has entered the market and created waves or excitement. (If we ignore the macro economics of Brexit uncertainty, fear of stagflation and a US threat to launch a pre-emptive strike on North Korea!).
We have seen many new entrants to the market place, in what many thought was an already oversaturated environment, which has put more pressure on established lenders in terms of service, gearing, flexibility and pricing. However, I’m not sure they’re offering anything new other than purporting to be just a little bit cheaper, a little bit quicker, or slightly more flexible, but in general they offer the same as the existing lenders offerings.
Perhaps it’s more pertinent to talk about what 2018 could bring, and the opportunities available to lenders, brokers and industry stakeholders in general. Will we see lenders leaving the market? Potential mergers as lenders look to consolidate their position, seeking economies of scale and refining costs? Or will we see some seeking and grasping new opportunities?
The UK Bridging market
Following last month’s Autumn Budget, there has been a lot of talk about post-Brexit opportunities in the UK, and we think international lending might be one of these opportunities for our industry.
The UK has been seen to be the world’s centre for financial services since the nineteenth century, and although this has been questioned post-Brexit, it doesn’t appear to be wavering in its position and why should it with its convenient time zone for other jurisdictions.
The UK has a more robust legal system, mature regulatory framework, and excellent infrastructure, and we know people come here to transact business for these reasons.
We have many established lenders with sophisticated lending frameworks, but it remains to be seen whether lenders, brokers and other industry stakeholders are taking full advantage of the opportunities that this enviable position affords.
Many of the big UK law firms we work with have counterparties or offices in international locations. Likewise, surveyors have representation outside of Britain. It took Savills no longer to report on a villa in Barbados than it did a flat in Battersea. Many of our counterparties inside and outside the industry have already ventured overseas and grasped these opportunities, so why – if the framework is there – doesn’t the bridging industry lend internationally more?
Lending in Scotland is no longer limited, nor is Northern Ireland, so the next natural step is to expand into lending elsewhere in Europe and beyond. If we can move into new UK jurisdictions, how much harder would it be to do it in France or Germany, for example?
What’s happening in Europe?
I have it on good authority that it isn’t that the mainstream banks in Europe are more flexible, and have more money – and appetite to lend. More that there isn’t a bridging / short term finance industry in many overseas locations if at all. Perhaps that is why the UK has in part fared much better than many of the European economies in recent times. We have never enjoyed such a long period of almost full employment.
Poland has been cited as a specific example to me where such financial solutions would be welcomed with open arms. Rates twice what we see here and gearing 30% less than the UK average would have people queuing down the road. The legal system also favours the lender over the borrower as well.
This year, we have worked on a number of international cases; for example, I worked with a couple – the husband was English, and the wife was French – who wanted to purchase a property in Paris. They had a French mortgage agreed in principle, but they needed to acquire the property sooner than this mortgage could complete. To ensure they made the completion deadline they desired, we were able to provide the bridging finance from the UK – a much quicker option.
A further example is working with a wealthy family whose circumstances changed, leading to them having to make the difficult decision of selling their holiday home in Barbados to free up some liquidity. The process was likely to take several months, so the option was short-term finance to provide the funding in a more timely manner. We were able to bridge this from the UK as well.
International bridging finance
International bridging finance is more than possible, despite there being some way to go in terms of overseas infrastructure.
According to the Chinese zodiac 2017 was never going to be hugely prosperous with the situation being much improved in 2018 when we should “seize some opportunities to gain great income”.
Will someone in the bridging finance industry cotton on to this in 2018 and bring something new to the table? We hear often about these post-Brexit opportunities, and of course there are some in the UK – we know people invest here because of its robust legal system and mature regulatory framework. But this extends beyond the UK; people want to take advantage of our financial systems, world class regulation, legal advice, loan management, and overall credibility for the benefit of their overseas assets as well as UK-based, and it will be interesting to see if 2018 brings further development in this area.