A recent poll conducted by Bridging & Commercial has revealed that over 50% of financial intermediaries believe that there is enough competition in the commercial bridging market.
According to the recent data from Bridging Trends, gross bridging lending declined to £142.75m during Q3 2017, down 4.9% compared with Q2 2017 (£150.07m). An increase in competition in the commercial market is a mixed blessing. For the borrower, they should benefit from a more competitive deal and perhaps a fast turnaround on their project requirements.
Lending on commercial is a complex business that requires specialist expertise in both funding and underwriting. While a competitive environment can lead to downward pressure on rates – lenders must ensure the quality of lending is fit for the requirements of the borrower.The number of lenders in the market right now means that rates are competitive by default. The sheer volume of competition also means greater product diversity.
The most important thing is that lenders continue to price for risk and do not get caught up in some kind of race to the bottom on rates. The bridging market is currently saturated with numerous bridging lenders who are competing on price and who are looking for volume. This should be seen as a good thing for the consumer, however, it is not good for the market.
With the potential for another recession around the corner, lenders should remain cautious about the types of deals that they look at. Looking at longer-term lenders, they all have different appetites which create market trends and specific lenders for specific products with some overlay which heightens competition. Bridging lenders should create more bespoke products to stir the market as well as being competitive on pricing. Currently, there is quite a lack of bridging enquiries in the commercial space.
Overall, the views on the commercial bridging market are positive for the future, despite the economic challenges surrounding the financial sector.