The latest lending data from the Association of Short Term Lenders presents plenty of reasons to be positive about our sector.

The figures, compiled by independent auditors, show bridging completions totalled £1.1bn in the second quarter (Q2) of 2021, an increase of 23.2% on Q1. Bridging loan books reflect this rise and now stand at more than £4.7bn. Applications fell slightly, by 1.7% to £7.36bn, but applications for the year ending 30 June were still up 26.9% on 2020, representing a strong pipeline of business.

Our lending figures for Q1 2021 showed a worrying trend downwards in terms of application-to-completion conversions. At the time we reported that it took £7.49bn-worth of applications to complete £918m of loans — the equivalent of more than £7-worth of bridging applications submitted to complete £1. Happily, the latest figures show a reversal in this trend, with just £6.63-worth of applications required to complete £1. We expect the situation to continue to improve as confidence is restored to the market.

It is crucially important that lenders maintain a commitment to robust underwriting

Confidence is an important factor in loan conversions; not just among lenders, but broker confidence that they will get an affirmative response, making them less inclined to submit multiple applications for the same case. The proliferation of multiple applications can slow lender processes, and therefore conversions.

Fast and responsible decisions

While it’s important in short-term lending for lenders to make quick decisions, it’s also important that they make responsible decisions. A pleasing aspect of the Q2 data is that the value of loans in default continues to fall, down 7.6% on Q1. The number of repossessions also fell again, reflecting the quality of lending and showing that the market is continuing to grow sustainably.

There will be challenges. The furlough scheme ends in September and, while it has been scaled back in recent months, there were still 1.9 million workers on furlough at 30 June. As the scheme unwinds, it is likely to be accompanied by a spike in unemployment.

Confidence is an important factor in loan conversions

There may be particular challenges in the construction industry. It has been widely reported that the pandemic has stimulated heightened demand for property renovations, extensions and refurbishments, which has been good news for those in construction. However, this demand has been accompanied by a lack of supply of some building materials, meaning it is taking longer and costing more to complete building projects.

Changes to rules around VAT and IR35 have encouraged some construction contractors to leave the industry, and put cashflow pressures on those who remain. This will only impose added pressure on investors and homeowners who have embarked on a refurbishment project or development.

While it’s important for lenders to make quick decisions, it’s also important that they make responsible decisions

It is therefore crucially important that lenders maintain a commitment to robust underwriting so that the market is able to continue to overcome challenges and achieve ongoing sustainable growth.

We are in a much stronger position than we could have hoped for a year ago and part of this is due to open communication between lenders and brokers. But now is not the time to rest on laurels. It is important that brokers choose to work with reputable lenders with a commitment to customer focus and transparency, and that they take a proactive approach to communicating and collaborating with those lenders. In turn, lenders must continue to deliver clarity and certainty.

Out of a pandemic we have created strong foundations for sustainable growth. Now is the time to build on them.

Vic Jannels is chief executive of the Association of Short Term Lenders