Alan Cleary

A cautionary tale for the bridging world

Another month, another P2P lender exits the market.

Its demise is a cautionary tale for the bridging world.

It is the second P2P lender this year to exit the industry and the third short-term lender to fail in the past 12 months.

Every time a lender folds, the industry is hit with more negative headlines. For this reason, those of us in the bridging market must sit up and take note. There is a very good reason that ‘bank lending restrictions’ exist within regulated businesses: to protect the customer, but also to protect the business, and by virtue of that, the broader market and economy as a whole.

Yes, it might be frustrating when a client who has a deal that looks like a dead cert is declined, but the failure of one deal to progress is an infinitely better outcome for that borrower, and the industry as a whole, than advancing the money and seeing both the deal and the lender that financed it go south.

This is the overriding reason why we became a bank in 2015. Having lived through the financial downturn in 2008, in my opinion, lenders who are wholly reliant on the capital markets do not fare well during periods of uncertainty. Becoming a bank has enabled us to build a strong liquidity position and helps us to navigate when the waters become choppy.

We must be extremely careful to remember the lessons learned when the mortgage market collapsed back in 2007 and 2008 – it wasn’t so very long ago.

Remember fast-track mortgages? Remember self-certification? The Mortgage Market Review outlawed these products because some of the lending done during those days was irresponsible.

I can see why some lenders might think rushing the money out the door pays — it’s a game of musical chairs and while the music is still playing, investors are still piling on the pressure to drive returns.

But brokers have their clients’ best interests at heart and that means thinking longer term than the fee today.

The bridging market is too often accused of sharp practice. Let’s step up and prove this theory wrong.

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