A recent poll conducted by Bridging & Commercial found that 56% of those surveyed expected to see more regulated bridging lenders next year.

However, with the poll showing a relatively even split, several lenders have now suggested that an oversupply of regulated firms may deter unregulated companies from seeking authorisation from the Financial Conduct Authority (FCA).

"As a non-regulated funder, it's our outsider's perception that the regulated bridging sector is presently well and truly saturated – from a lending perspective at least,” explained Bob Sturges, head of PR and communications at Fortwell Capital.

"We're therefore completely unsurprised that the pace of new lender entrants has slowed, but attribute this less to Brexit than to simple market forces.”

Although Bob believed that Brexit may not be the most significant factor in deterring lenders from becoming regulated, earlier this month Bridging & Commercial found that no bridging lenders had applied for authorisation since the EU referendum.

'Demand for regulated bridging products might increase'

Regardless, Bob said that future market conditions could result in banks tightening their lending, which may in turn provide an opportunity for specialist lenders.

"But demand for regulated bridging products might increase in the future should the banks and other mainstream providers decide or be forced by factors beyond their control to constrain their lending.

"Were this to happen – and anecdotal evidence suggests it has begun – new blood might be attracted to a sector promising better returns than of late."

Furthermore, Bob was not the only bridging lender to argue that the regulated market was saturated.

Sam Howard, chief operating officer at Regentsmead, warned that the situation could worsen.

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“The lending market is saturated at the moment, leading to increased LTVs and [the] lowering of rates, which ultimately leads to increased risk.

“More regulated lenders will only accentuate the situation.”

By contrast, Benson Hersch, CEO of the Association of Short Term Lenders, believed that lenders would not have been permanently deterred from becoming authorised.

“It is possible that uncertainty in the market will discourage some lenders from becoming regulated as many are unsure if anything (including regulation) will change in the near future, although I think this is very unlikely.

“Although no bridging lenders have applied for authorisation since the Brexit vote, many are considering it.

“These lenders will, of course, need to assess the market and will need to get all of their ducks in a row before proceeding.”

'It could quite legitimately ask to have the whole industry regulated'

Despite acknowledging that authorisation could open the door to new clients, Sam revealed that Regentsmead was uncomfortable with some of the methods used in regulated bridging.

“Being regulated enables a lender to bridge people's primary residences and self builds, which clearly increases the pool of potential customers.

“However, Regentsmead has never felt comfortable with the concept of taking charges over people's homes and have preferred the flexibility and speed of lending on new builds, conversions and refurbs that are not primary residences.”

Meanwhile, Narinder Khattoare, sales and marketing director at Kuflink Bridging, stressed the importance of having both regulated and unregulated lenders in the market.

Nevertheless, he voiced concerns that the FCA was worried about unregulated lenders taking on deals meant only for their regulated counterparts.

“My particular concern would be that if the FCA’s worries prove to be correct, then it could quite legitimately ask to have the whole industry regulated, which could have far-reaching effects on those lenders who had no intention of transacting regulated business.

“As the majority of bridging lending is unregulated, provided those lenders are willing to be transparent in their business acquisition, then the regulator will have no reason to put the unregulated sector under the microscope.”