The continuing shortfall in funding for commercial property development from traditional lenders has resulted in a larger market for bridging lenders, who offer a short-term funding option.
A recent article in the Mortgage Strategy publication claims the shortage of mainstream lending has had a major effect on the bridging loan industry. Most lenders have experienced a rise in business, as developers look to them for a short-term option while they wait for their commercial mortgage to come through.
A spokesman for one lender said, “Banks no longer have the liquidity to support it as a result of the substantial losses they suffered following the fall in property values and their losses on loans to the bridging sector.” Lenders are also beginning to report a fall in the number of defaults on bridging loans, indicating that the market is indeed experiencing an upturn and funding is becoming more available.
The bridging sector may soon be affected by FSA regulation. In March, the previous government announced that it would be bringing in regulation for all secured loans, which could include bridging loans – so watch this space for more information.