The Year Ahead for Bridging
3 January 2012Colin Sanders - CEO
At the beginning of each New Year, I enjoy reading various pundits’ business forecasts for the year ahead. I enjoy even more being reminded of their predictions for the year just gone, which, invariably, were horribly wrong. The worst culprits – perhaps unsurprisingly – are the highly-rewarded ‘experts’ whose very job it is to get it right.
But now it’s my turn, and at the risk of having the smug smile wiped from my face in a year’s time, I offer this view of how I see 2012 panning out for bridging and the wider short-term lending sector.
At a sector level, I see one of the principal challenges coming from spikier competition brought about by a greater number of lenders vying for a share of a relatively small market. This will manifest itself in a number of ways, such as product and process innovation; but I expect lenders, and their funders, to resist resorting to the obvious, but ultimately self-defeating, tactic of loss-leading pricing reductions.
For some lenders, funding itself may be an issue as hitherto reliable providers choose either to hoard cash or divert it to other lucrative income streams. But I don’t believe this will be of sufficient scale to upset the very positive momentum of the past year, particularly if, as expected, mainstream funding continues to remain rationed.
Regulatory issues will feature large on the agenda but not necessarily in any conclusive way. The local regulator, the FSA, faces significant changes in both its remit and structure and may find the short-term sector a distraction too far. Elsewhere, the EU authorities will move at their usual glacial, and inefficient, speed.
But the mood is clearly for more regulation, not less. The sector can also expect more intense critical scrutiny from an increasingly-alert media, particularly amongst the nationals. Treating customers fairly will be a prime point of focus. Lenders and intermediaries alike would therefore be wise to prepare, adapt and behave accordingly.
Fraud has the potential to become a problem if allowed to take root. But the solution lies in our own hands. Lenders must be beyond reproach by deploying robust due diligence policies and procedures. Nothing less than a zero-tolerance attitude towards recalcitrant brokers (and valuers and solicitors) will do. There also needs to be far more effective cross-industry co-operation.
In this regard, I hope 2012 is the year in which we see the emergence of truly effective and representative trade bodies for the sector. The basis for this already exists, and the more mature bodies, such as NACFB, perform a sterling service for their members. But more can be done, and as short-term lending continues to emerge from its previously ambiguous past, there is a pressing need for our trade bodies to evolve from ‘clubbiness’ to become the serious, vocal and articulate champions of the sector.
As a final thought, I see 2012 offering challenge and opportunity in equal measure. But I do not see anything ahead that frightens or daunts me. The sector has successfully attracted some big name, deeply experienced and highly professional players. This won’t change overnight, and many of the painful lessons of the past few years are too recent to have been forgotten. So, as the banks continue to conserve cash, the opportunities will remain. Whether we pursue them with the long-term in mind is in our hands.