A new report by Ernst & Young titled ‘A view for 2018 and beyond’, surveyed 11 bridging finance services and found that many of them are considering selling their business in the next two to five years.
The reasons for this is fierce competition between bridging lenders. If lenders cannot compete on the cost of their loans, they need to have a unique selling proposition or operate in specialist areas to distinguish themselves from competitors.
If lenders do close, then those that remain will, according to the report, be more profitable and provide good service for borrowers. The remaining lenders will tend to be the larger ones who are able to grow their market share. Ernst & Young believes that borrowers will not be negatively affected if some lenders close or merge with other financial organisations. The lenders that remain will probably have improved funding and launch new innovative products.
Instead of selling or exiting the market, many lenders may diversify in order to grow. Some are looking to expand to outside of Britain, as well as launching new financial products. Many lenders are considering trading in the US as well as Britain, but few want to expand into Europe. The US regulations favour bridging lenders, and there are no language barriers when communicating with borrowers or brokers.
There is a high demand for bridging loans. Lenders are used to being flexible and adapting to the evolving needs of borrowers, and should continue to innovate.