STRONGER, LEANER AND FITTER

Taking a look at the year that was and the prospects for 2019. As   the   Christmas   Party   season   gets   into   full   swing   and   the   year   draws   to   a   close   it’s   worth   reflecting   on   just   how   far   the   bridging   industry   has   come, not just in the last twelve months, but in the ten years since the Global Financial Crisis of 2007/08. Back   in   2008   the   world   was   a   very   different   place.   As   the   Credit   Crunch   tightened   its   grip   early   in   the   year,   interest   rates   were   cut   from   what   now seems    like    a    positively    stratospheric    5.5%    to    5.25%,    Heather    Mills    eased    any    personal    money    worries    with    a    £24.3M    divorce    settlement    from estranged husband Sir Paul McCartney and Manchester United were heading towards their tenth Premier League title and clearly still a good side! Meanwhile    the    UK    specialist    lending    sector    was    dominated    by    banks,    be    they    High    Street    lenders    or    American    Banks,    funded    largely    by    the securitisation   model.   When   the   US   Housing   Bubble   burst   those   of   us   working   in   the   industry   remember   very   clearly   just   how   quickly   funding   lines evaporated and the American Banks disappeared back across the Atlantic! A   large   void   was   left   but   into   this   space,   slowly   at   first   but   then   with   ever   greater   momentum,   grew   a   strong   and   vibrant   specialist   lending   sector under-pinned   by   an   unprecedented   diversity   of   funding   sources.   New   lenders   proved   that   they   could   thrive   in   any   macro-economic   environment, many   being   founded   and   forged   during   a   period   of   huge   economic   uncertainty.   This   new   breed   of   lender   played   a   hugely   significant   role   in   financing the   inherent   dynamism   of   our   property   investors   and   SME’s   and   in   doing   so   helped   to   ensure   the   UK   bounced   back   from   the   financial   crisis   more strongly than virtually any other nation. Arguably   the   worst   recession   in   living   memory,   a   crisis   that   was   actually   housing   market-led,   saw   UK   house   prices   fall   13.7%   between   2007   and   2009 but   this   fall   was   recovered   in   a   little   over   3   years.   Today   some   of   the   first   new   entrants   have   grown   and   become   banks   themselves.   They   have   been joined by Challenger Banks and peer to peer lenders and in recent months by a further surge of new lenders. A   wave   of   liquidity   into   both   the   bridging   and   development   sectors   has   helped   to   ensure   house   build   numbers   are   at   near   record   levels   and   yet supply   is   still   failing   to   keep   pace   with   demand.   The   UK   housing   market   is   fundamentally   strong   and   robust   and   £4Bn   plus   of   completions   this   year underlines   the   increasing   maturity   of   the   short-term   lending   market.   Against   this   incredibly   positive   backdrop   what   could   possibly   go   wrong   in   2019? In truth there are a few clouds on the horizon! Having   done   well   to   avoid   the   ‘B’   word   up   to   this   point   it’s   impossible   to   avoid   it   any   longer!   There   is   no   escaping   the   fact   that   2019   will   be   a   year   of great   geo-political   uncertainty   as   the   Brexit   debacle   inevitably   comes   to   a   head,   resurgent   populism   and   the   migration   crisis   deepens   in   Europe,   the US   enters   unchartered   waters   with   ever   greater   uncertainty   surrounding   its   economic   and   foreign   policy   prospects   and   to   cap   it   all   there   is   a threatened slow down in China’s economic growth rates. Added   to   this   background   of   macro-economic   uncertainty   there   have   been   increasing   signs   in   recent   months   that   the   resilience   of   the   UK   specialist lending   market   is   being   pushed   too   far.   Whilst   a   glut   of   liquidity   is   great   for   consumers,   driving   down   rates   and   enhancing   LTV’s,   it   simultaneously increases    pressure    on    new    lenders    seeking    to    obtain    market    share.    The    inevitable    result    is    that    some    of    these    new    lenders,    perhaps    lacking experience,   start   to   take   ill-judged   underwriting   risks.   Reports   in   recent   weeks   have   drawn   attention   to   a   peer   to   peer   lender   with   unsustainable default rates seeking assistance from the FCA and another alternative funder filing for liquidation. Nor,   it   seems,   is   the   problem   purely   confined   to   new   entrants.   For   instance   there   are   increasing   reports   of   lenders   from   a   purely   bridging   background who,   having   funded   light   refurbishment   projects,   suddenly   thought   they   were   qualified   to   finance   full   scale   ground   up   developments   with   all   their inherent   complexity.   Whilst   it   may   have   been   possible   to   get   away   with   bad   lending   decisions   in   a   rising   or   even   relatively   static   market   where   there was always another lender prepared to re-bridge you out of trouble, that escape route no longer exists. In   summary   there   are   lenders   in   the   sector   who   have   been   loss-making   even   in   the   relatively   benign   trading   conditions   of   the   last   two   to   three   years, lenders   who   have   been   in   no   position   to   make   contingency   plans   for   the   harder   conditions   that   may   well   lie   ahead.      Consequently   2019   will   almost certainly   see   further   casualties   but   if   we   can   avoid   any   serious   reputational   damage   to   the   sector,   these   losses   will   only   serve   to   strengthen   the industry. The    majority    of    specialist    lenders    are    strong,    well-funded    and    populated    by    experienced,    adaptable,    technically    competent    and    innovative professionals.   Darwinian   evolutionary   theory   could   well   ensure   that   whatever   awaits   us   in   2019   the   industry   will   be   stronger,   leaner   and   fitter   by   this time next year and celebrating another record year of lending volume. Brian West, Director Central Bridging

BESPOKE BRIDGING LOAN

& SHORT TERM LENDER

Central Bridging, 34 Queen Anne Street, London, W1G 8HE Tel: 03332 400 506   Email: enquiry@centralbridging.co.uk   Web: www.centralbridging.co.uk Central Bridging is a trading style of Central Bridging Loans Ltd. Registered in England & Wales | Company Registration Number 07728274. Central Bridging is not regulated by the Financial Conduct Authority (FCA). All loans arranged by Central Bridging are non regulated contracts as defined under The Financial Services and Markets (Regulated Activities) Order 2001 and the Financial Service and Markets Mortgage Credit Directive Order 2015. © Copyright Central Bridging Loans Limited Privacy Policy
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STRONGER, LEANER

AND FITTER

BESPOKE BRIDGING LOAN

& SHORT TERM LENDER

Taking   a   look   at   the   year   that   was   and the prospects for 2019. As   the   Christmas   Party   season   gets   into   full   swing   and   the   year   draws to   a   close   it’s   worth   reflecting   on   just   how   far   the   bridging   industry has   come,   not   just   in   the   last   twelve   months,   but   in   the   ten   years since the Global Financial Crisis of 2007/08. Back    in    2008    the    world    was    a    very    different    place.    As    the    Credit Crunch   tightened   its   grip   early   in   the   year,   interest   rates   were   cut from   what   now   seems   like   a   positively   stratospheric   5.5%   to   5.25%, Heather    Mills    eased    any    personal    money    worries    with    a    £24.3M divorce   settlement   from   estranged   husband   Sir   Paul   McCartney   and Manchester   United   were   heading   towards   their   tenth   Premier   League title and clearly still a good side! Meanwhile   the   UK   specialist   lending   sector   was   dominated   by   banks, be   they   High   Street   lenders   or   American   Banks,   funded   largely   by   the securitisation   model.   When   the   US   Housing   Bubble   burst   those   of   us working    in    the    industry    remember    very    clearly    just    how    quickly funding   lines   evaporated   and   the   American   Banks   disappeared   back across the Atlantic! A   large   void   was   left   but   into   this   space,   slowly   at   first   but   then   with ever   greater   momentum,   grew   a   strong   and   vibrant   specialist   lending sector     under-pinned     by     an     unprecedented     diversity     of     funding sources.    New    lenders    proved    that    they    could    thrive    in    any    macro- economic    environment,    many    being    founded    and    forged    during    a period    of    huge    economic    uncertainty.    This    new    breed    of    lender played   a   hugely   significant   role   in   financing   the   inherent   dynamism   of our   property   investors   and   SME’s   and   in   doing   so   helped   to   ensure the    UK    bounced    back    from    the    financial    crisis    more    strongly    than virtually any other nation. Arguably    the    worst    recession    in    living    memory,    a    crisis    that    was actually   housing   market-led,   saw   UK   house   prices   fall   13.7%   between 2007   and   2009   but   this   fall   was   recovered   in   a   little   over   3   years. Today   some   of   the   first   new   entrants   have   grown   and   become   banks themselves.   They   have   been   joined   by   Challenger   Banks   and   peer   to peer lenders and in recent months by a further surge of new lenders. A   wave   of   liquidity   into   both   the   bridging   and   development   sectors has   helped   to   ensure   house   build   numbers   are   at   near   record   levels and    yet    supply    is    still    failing    to    keep    pace    with    demand.    The    UK housing   market   is   fundamentally   strong   and   robust   and   £4Bn   plus   of completions   this   year   underlines   the   increasing   maturity   of   the   short- term   lending   market.   Against   this   incredibly   positive   backdrop   what could   possibly   go   wrong   in   2019?   In   truth   there   are   a   few   clouds   on the horizon! Having   done   well   to   avoid   the   ‘B’   word   up   to   this   point   it’s   impossible to   avoid   it   any   longer!   There   is   no   escaping   the   fact   that   2019   will   be   a year   of   great   geo-political   uncertainty   as   the   Brexit   debacle   inevitably comes    to    a    head,    resurgent    populism    and    the    migration    crisis deepens    in    Europe,    the    US    enters    unchartered    waters    with    ever greater    uncertainty    surrounding    its    economic    and    foreign    policy prospects   and   to   cap   it   all   there   is   a   threatened   slow   down   in   China’s economic growth rates. Added   to   this   background   of   macro-economic   uncertainty   there   have been   increasing   signs   in   recent   months   that   the   resilience   of   the   UK specialist   lending   market   is   being   pushed   too   far.   Whilst   a   glut   of liquidity   is   great   for   consumers,   driving   down   rates   and   enhancing LTV’s,   it   simultaneously   increases   pressure   on   new   lenders   seeking   to obtain   market   share.   The   inevitable   result   is   that   some   of   these   new lenders,      perhaps      lacking      experience,      start      to      take      ill-judged underwriting   risks.   Reports   in   recent   weeks   have   drawn   attention   to   a peer     to     peer     lender     with     unsustainable     default     rates     seeking assistance    from    the    FCA    and    another    alternative    funder    filing    for liquidation. Nor,   it   seems,   is   the   problem   purely   confined   to   new   entrants.   For instance    there    are    increasing    reports    of    lenders    from    a    purely bridging     background     who,     having     funded     light     refurbishment projects,   suddenly   thought   they   were   qualified   to   finance   full   scale ground   up   developments   with   all   their   inherent   complexity.   Whilst   it may   have   been   possible   to   get   away   with   bad   lending   decisions   in   a rising   or   even   relatively   static   market   where   there   was   always   another lender   prepared   to   re-bridge   you   out   of   trouble,   that   escape   route   no longer exists. In    summary    there    are    lenders    in    the    sector    who    have    been    loss- making   even   in   the   relatively   benign   trading   conditions   of   the   last   two to    three    years,    lenders    who    have    been    in    no    position    to    make contingency   plans   for   the   harder   conditions   that   may   well   lie   ahead.     Consequently   2019   will   almost   certainly   see   further   casualties   but   if we   can   avoid   any   serious   reputational   damage   to   the   sector,   these losses will only serve to strengthen the industry. The     majority     of     specialist     lenders     are     strong,     well-funded     and populated    by    experienced,    adaptable,    technically    competent    and innovative    professionals.    Darwinian    evolutionary    theory    could    well ensure   that   whatever   awaits   us   in   2019   the   industry   will   be   stronger, leaner   and   fitter   by   this   time   next   year   and   celebrating   another   record year of lending volume. Brian West, Director Central Bridging
Central Bridging, 34 Queen Anne Street, London, W1G 8HE Tel: 03332 400 506  Email: enquiry@centralbridging.co.uk Web: www.centralbridging.co.uk Central Bridging is a trading style of Central Bridging Loans Ltd. Registered in England & Wales | Company Registration Number 07728274. Central Bridging is not regulated by the Financial Conduct Authority (FCA). All loans arranged by Central Bridging are non regulated contracts as defined under The Financial Services and Markets (Regulated Activities) Order 2001 and the Financial Service and Markets Mortgage Credit Directive Order 2015. © Copyright Central Bridging Loans Limited Privacy Policy
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