Why should you care about the moratorium extension?

For many lenders, this will have little immediate impact as they continue to follow guidance from the regulator, which directs against enforcement before the end of October, but there are others whose regulatory status, and commercial imperatives, meant that they were planning to recommence proceedings as soon as the moratorium was lifted.

This will not just be a delay of a month, of course. Even if the moratorium isn’t further extended, this extra month on pause will only add to the logjam of cases that are due to hit the courts. Some borrowers may seek to take advantage of the situation and pandemic nervousness within the courts, and some courts will make mistakes, so the delays will lengthen. The long and short of it; it is going to take lenders a lot longer to get their money back.

But why should you care?

Bridging finance is an incredibly important part of the market and should be an important tool for you as a broker. Last year bridging loan books grew to £4.5bn, according to the ASTL, and based on their information, an increase of nearly 20% on 2018. The size of the market may well be substantially bigger than that. Short-term lending is a hamster wheel, where finance is provided to borrowers for a number of months before being returned so that it can be deployed again for new customers. If borrowers do not repay, and lenders are not permitted to recover their money, then present and future capability to lend is reduced, and this will impact everybody involved in the process. Most importantly it will ultimately have a detrimental impact on customers, who will have less choice and face more restrictions and higher rates.

This problem is less acute in the term mortgage market, where business models are built over much longer periods and delays have a less dramatic impact, but it exists nonetheless. It is, however, the future of short-term lending that is at greatest risk from this latest extension to the moratorium.

It’s a prime example of kicking the can down the road and the longer this continues, the more negatively it will impact bridging lenders, brokers and customers in the future.