With Masthaven’s exit raising questions about the fate of its bridging book, industry experts suggest it will not be the last to leave the market in 2022.
Following the news that Masthaven Bank is due to wind down is UK lending operations, discussions have turned to the state of its bridging loan book, which is reportedly being touted to potential buyers, and whether this is an isolated exit or a long-term trend.
Phil Mabb, property finance broker at Bridge Development, suggested that this will not be the only name to exit the British bridging scene in 2022, and has questioned whether this is simply a matter of the lending environment or something deeper.
While some short-term lenders continue to act “all guns blazing,” according to Mabb, others are putting in a lot of hard work for a lower pay-off, and there are signs that more market exits will follow.
Mabb suggested that this is simply the nature of the market at the moment, with a lot of money available from funding lines, high levels of competition, and not enough deals to make up the ratio.
Jamie Jolly, managing director of SoMo, said: “I’m not surprised by the route Masthaven has gone down, and there’s a really attractive opportunity there to pick that book up, but I think the real value of Masthaven is its people.
“What they’ve done in a decade is very admirable.”
However, he added that this was going to be the start of a trend of lenders scaling back over the next couple of years, adding: “There are certain lenders in our space that are not making any money, and that have not made any money for three or four years.
"That’s not sustainable, irrespective of how healthy your funding line is.”
The bridging market has seen a historically low-rate environment over the past two years or so, with lenders engaging in what some have warned could be a ‘race to the bottom’, leading to questions around what this means for service and profitability.
Traditionally a more expensive, but speedy and effective, form of finance, Jolly suggested that this low-rate trend has likely fed into the matter of lenders making a move away from what was previously a high yielding market.
He said: “I scratch my head when I see some of these rates going out – there’s no money in it.”
This trend does not mean collapse for the bridging market, however.
In fact, Jolly suggested that while the loss of any business – and more importantly the job losses that entails – is not to be celebrated, it could prove healthy overall for what is currently an over-stuffed market.
He said: “The market now is as congested as it can be. There are huge amounts of lenders.
“I’m comfortable with that, I think choice is a great thing, but there are too many lenders operating in this space.
“It’s a great product, a great market to be in, but there is only so much business that we can do, right?”
Jolly predicted that somewhere in the region of 10 to 20 lenders would likely close as part of this course correction, but that he is not concerned that this will have a negative effect on the product or the market.
For Mabb, there are already several names on the potential hitlist, and he suggests that some may quietly exit the market in the not-too-distant future.
Nevertheless, Jolly insisted that as more brokers and borrowers come to understand the value of short-term lending, even if rates rise and some lenders find the need to exit, this sector will continue to see high demand.
