Facing the challenges ahead. Solid foundations from which to move forward
It seems that the ongoing saga of Brexit is doing little to dampen the growth of the bridging sector. In the most recent lending figures compiled by auditors from data provided by members of the ASTL, it was confirmed that bridging loan books grew to a record £4.62bn at the end of the second quarter of this year, representing growth of 11.7% compared to Q1 2019 and an increase of 14.4% on the same quarter last year.
Bridging loan applications also hit a record high in the 12 months preceding the end of Q2 2019, with £22.13bn of applications representing a 9.7% increase on the same period the previous year.
These are strong results, particularly given the uncertain politic and economic environment, but it is very important that we do not get carried away. Record lending is all very well, but if it comes accompanied by the ignominious collapse of lenders, as we saw with Lendy earlier this year, then reputation of the industry will be damaged and the sustainability of lending such volumes should be questioned. The challenge for the industry now is to continue this level of activity whilst maintaining high standards of underwriting and customer focus.
This is particularly important as it looks like the writing is on the wall with regards to regulation of the short-term commercial lending sector. At the end of July, the House of Commons Treasury Committee urged HM Treasury to extend the remit and powers of the FCA to unregulated SME lending, amongst other areas.
The concern is than when regulation does come, it will be targeted at the lowest common denominator to those organisations that exhibit the most questionable practices. This means that it won’t be light touch and it will impact the whole market. This may protect some customers, but it will also be to the detriment of many more and stifle innovation in this vibrant sector.
There is, however, good news. We have a window of opportunity to influence the shape of regulation and demonstrate that we are collectively a responsible industry that operates with the best intentions of our customers at our heart. And we are doing this from solid foundations in a growing market.
Lenders may feel competitive pressures, given the over-supply of funding, but there is still a good level of demand and the market is in a healthy state. We must use this as a foundation to build the next chapter of development and this is why it is so important that we agree across the board to a code of conduct that protects our investors, our borrowers and our sector.
My, admittedly biased, opinion is that there has never been more need for an organisation like the ASTL to take the lead and ensure the industry follows a code of conduct that ensures customers get the best deal, are not misled, and can encourage the FCA to take a pragmatic approach to regulation.
We have many challenges ahead of us, but at least we are facing them from a strong foundation.
Benson Hersch, CEO of the ASTL