Bridging buyouts – are lenders exiting the market in the short term?
Following news that Masthaven Bank is set to end its UK lending operations, discussions turned to the status of its bridge loan portfolio, which would be presented to potential buyers, and whether it is an isolated exit or a long-term trend. .
Phil Mabb, property finance broker at Bridge Development, suggested it wouldn’t be the only name to leave the UK bridge scene in 2022, and wondered if it was just an environmental issue loan or something deeper.
While some short-term lenders continue to act “all fires,” according to Mabb, others are working hard for underperformance, and there are signs that more market exits will follow.
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Mabb suggested that’s just the nature of the market right now, with lots of money available from funding lines, high levels of competition and not enough deals to offset the ratio.
Jamie Jolly, Managing Director of SoMo, said: “I’m not surprised by the road Masthaven has taken, and there’s a really attractive opportunity there to pick up this book, but I think the real value of Masthaven is its people. .
“What they have done in a decade is very admirable.”
However, he added that this was going to be the start of a lender shrinking trend over the next couple of years, adding: “There are some lenders in our space who are not making money and who have not not made any money. for three or four years.
“It’s not sustainable, regardless of the health of your funding line.”
The relay market has seen a historically low rate environment for the past couple of years or so, with lenders engaging in what some have warned could be a ‘race to the bottom’, which raises questions about what this means for service and profitability.
Traditionally a more expensive, but quick and efficient form of financing, Jolly suggested this low-rate trend has likely fueled the problem of lenders moving away from what was once a high-yield market.
He said: “I scratch my head when I see some of these rates come out – there’s no money in them.”
This trend does not mean a collapse of the bridge market.
In fact, Jolly suggested that while the loss of any business – and more importantly the resulting job losses – is not to be celebrated, it could turn out to be healthy overall for what is currently a crowded market.
He said: “The market is now as crowded as it can get. There are huge amounts of lenders.
“I’m comfortable with it, I think the choice is a good thing, but there are too many lenders operating in this space.
“It’s a great product, a great market, but we can’t do a lot of business, can we? »
Jolly predicted that somewhere in the region of 10-20 lenders would likely close as part of this course correction, but he doesn’t fear it will have a negative effect on the product or the market.
For Mabb, there are already several names on the potential target list, and he suggests some may quietly exit the market in the not-too-distant future.
Nonetheless, Jolly insisted that as more brokers and borrowers understand the value of short-term lending, even as rates rise and some lenders find the need to pull back, this sector will continue to see strong demand.