A state of “semi-euphoria” in the bridging sector has prompted the Association of Short Term Lenders to urge caution, writes Sarah Davidson.
Benson Hersch, chief executive of the ASTL, said no obvious end to rising house prices was encouraging more and more new lenders into the bridging market with “worrying” signs that some lenders were raising loan-to-values and dropping rates to compete for market share.
He also warned against peer-to-peer lenders allegedly offering bridging loans with “no credit checks, no application forms, value only lending”.
Hersch said: “Maybe a little caution is called for. Clearly, interest rates make what once would have been regarded as stratospherically high property prices affordable.
“No-one knows if current stress tests are sufficient to assess what would happen if rates rise to what once were “normal” levels.”
In a post-election sentiment survey every single ASTL member said they felt the volume of business for their firms would grow this year while 92% felt the same will apply to the bridging industry as a whole.
Property prices outside London and the South East are expected to rise, according to 69% of respondents, with the rest feeling that they will stay at present levels.
Hersch added: “All of the above reflects a mood of semi-euphoria, but what about the black swans, the so-called unknown unknowns?
“As Warren Buffet famously remarked, ‘only when the tide goes out do you discover who’s been swimming naked’.”