Bridging finance expert Mark Posniak, writing on the website Financialreporter.co.uk in May 2017, has said that now is the time of the third wave of bridging finance lenders.
The first wave of bridging lenders was compared by Posniak to the Wild West, when lenders were not very professional. They tended to create bespoke lending packages tailored for each individual deal.
After the financial crash of 2008, the second wave of lenders emerged. Many high street banks were extremely cautious about lending. The new breed of bridging lenders emerged as an alternative to bank lending. They were more professional and had higher standards than the first wave lenders.
As more lenders entered the bridging finance market, competition drove down the cost of bridging loans. These lenders tended to focus on loan-to-value when assessing the risks that set interest rates.
According to Posniak, a third generation of lenders is now emerging. They do not focus just on loan-to-value, but also regard high-deposit lenders as carrying less risk. Posniak argues that someone with a low deposit is not necessarily a high-risk borrower.
The third wave lenders are prepared to “drill down into risk”, say Posniak. This means that, like the first wave of lenders, the third wave of bridging lenders will create more bespoke and complex risk assessments when pricing bridging loans.
The main difference between modern bridging lenders and previous ones is that their approach is more professional and transparent, combining the best elements of the first and the seconds generations of bridging lenders.