Carl Graham, sales director at Bridgebank Capital, said “certain aspects of the short-term market were beginning to bear a resemblance to parts of the sub-prime market back in 2006” when packagers had considerable influence over lenders vying for market share.
Graham said: “I understand there are pressures to gain market share, but if we continue down the path of ever escalating LTVs, coupled with falling rates and insufficient attention to appropriate risk-pricing, we may start to see some issues come to light pretty quickly.
“We must be mindful of the same traps that many fell into back in the mid-2000s, yet few seem willing to raise the issue. The risk remains that there may be serious casualties over the coming years.”
He characterised the sub-prime market before the financial crisis hit in 2007 as being dominated by many packagers demanding ever-lower rates and ever-higher LTVs from lenders and said parts of the bridging market today “were beginning to bear some similarities”.
He added: “Lenders in this market shouldn’t feel browbeaten into compromising on quality and was confident that diligent lenders would not take their eye off the quality of their lending books for short term gain.”