It’s almost 11 years since the unthinkable happened in the UK banking sector. September 2007 saw a “run” on Northern Rock with queues forming outside the branches of the former building society. People wanted their money – but the bank was running out of cash, as well as sources of funding. The subsequent collapse of Northern Rock was the first signal to the British public that the credit crunch had arrived in the UK.

People panicked. Consumers stopped spending. High street shops started closing down. High street funding rapidly dried up as mainstream lenders tightened up their lending criteria. This presented an opportunity for specialist lenders to establish themselves and grab an increased market share.

Some high-profile bridging lenders who thought the good times would roll forever were caught out. As property prices started falling and housing market activity slowed to a crawl; the impact of so-called “liar loans” and irresponsible lending practises started to show.

In this challenging environment, bridging lenders felt the need for a platform where they could learn from each other, and improve the professionalism of the sector. In March 2018 the Association of Short Term Lenders (ASTL) was established, initially with 17 lenders. Andrew Bloom, CEO of Masthaven, says: “In doing so, the ASTL should rightly be credited with moving the short-term finance sector from a cottage industry right into the mainstream – where it truly belongs.”

The ASTL sets high standards which members need to meet. It also helped HM Treasury, the Financial Conduct Authority and the Financial Ombudsman Service understand the short-term lending sector better. Membership of the ASTL has grown to 35 members and 28 associate members.

The big question for ASTL members is: should we be preparing for another crash? These are undoubtedly uncertain times. The Royal Institute of Chartered Surveyors (RICS) says tax and stamp duty reforms have impeded the growth of the private rented sector. Meanwhile the housing market as a whole is slowing and properties are taking longer to sell. Should we be worried?

Personally I think that we could see an economic downturn in the short-term. This will mean that, as in 2008, there will be opportunities for the bridging sector, but also dangers we need to be aware of. There will inevitably be casualties and lenders need to embrace technology to meet the demands of a changing world.

This quote from Alex Massie in The Times – about cricket – can also be applied to the bridging sector.

“Savour it while you can, for it will not be with us very much longer. Cricket can just about afford this rosy melancholy; as a society, politically and economically, we cannot.

Cricket’s struggle is only a small part of this much greater and eternal, quandary: how to manage change so things may remain the same but slightly better? Hard enough at the best of times but daunting when you sense a great storm is brewing.”

Benson Hersch, CEO of the ASTL

A version of this article appeared in the September edition of Specialist Lending Solutions