Here, the Association’s Chief Executive, Benson Hersch, voices the views of the members, with the aim to provide insight into the issues affecting principal lenders and ways to submit more effective finance applications.
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(Q) With the implementation of MMR on the horizon, what are the main things that will affect bridging?
The key issues are the implementation of MMR and the transfer of regulation of Consumer Credit Act loans from the OFT to the FCA. Virtually all bridging lenders who currently hold Consumer Credit Act licences have registered for interim provision. This, as the name implies, is a temporary situation pending application for full authorisation. As the FCA website states, “This will mark the beginning of [a] very different regime, with greater supervision and enforcement of standards.”
However, the MMR will only affect lenders who do regulated business, which excludes many in the bridging market. In light of the MMR rules however, many bridging lenders will concentrate on execution-only; and leave advice to brokers. As a result, most bridging lenders will continue to put all of their business through intermediaries, but there will be more pressure for applications submitted to be accurate and for brokers to know their stuff.
(Q) How should lenders be preparing for regulatory change?
Lenders, where they have decided not to opt for permission to give advice, will need to be aware that the parameters for non-advised sales are very tight. Staff will need to be trained to ensure that (a) they fully understand the difference between providing information and giving advice and; (b) customers are made fully aware that they are not being offered advice.
(Q) How big will bridging lending get in 2014?
No-one really knows the size of the market. I do expect more lenders to enter the market, some will be lenders who already offer other products and some may well be from the intermediary sector who see opportunities to enter the market. Certainly, most people I’ve spoken to recently are bullish about prospects for 2014. As we approach the 2015 elections, there will be some uncertainty, but the need for increased housing will remain.
(Q) With new entrants, and with bridging diversifying, what’s next for bridging? Lenders are seemingly launching longer termed products…
Larger firms will offer a range of products, including longer-term loans. Some have also entered the secured (i.e. second charge medium term) loan market. Firms will offer innovative products to meet the need for funding for SMEs and developments. Bridging is now firmly established as an important part of the so-called Alternative Finance sector.
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