Research by the Association of Short Term Lenders (ASTL) has revealed seven in 10 bridging lenders are concerned about the capacity of courts to deal with the backlog of cases when the moratorium is lifted.

Figures from the HM Courts & Tribunal Service suggest the pre-Covid-19 baselines for civil receipts were at 38,521. This plummeted to a low of 4,626 on 10 May.

Now there are concerns amongst bridging lenders about the capacity of the courts to cope when they eventually implement social distancing procedures and the government lifts the freeze on repayments.

Jonathan Newman, senior partner at Brightstone Law, said: “A system that is used to processing more than 38,000 each week has dropped to fewer than 5,000 during some weeks, which indicates the scale of the logjam that is waiting to hit the courts system.”

He added: “It’s not that bridging lenders are hungry to commence enforcement action, but the combination of payment deferrals and the government moratorium has created a disproportionate funding problem for short-term lenders and it’s important for them to exercise their rights to begin a process of recovery.

“Kicking the can down the road is ultimately worse for existing customers who may see their equity eroded, and potential new customers who may have their access to borrowing limited as a result.”

Inhibiting new lending

The ASTL study also found 41% of bridging lenders were concerned the continued extension of the enforcement moratorium was going to reduce their capacity to carry out new lending in the future.

Vic Jannels, CEO at the ASTL, said: “This is one of the reasons that we have been working so hard at the ASTL to engage with the Treasury and have a rational and forward-thinking discussion about the impact of the enforcement moratorium in its current format and I am pleased to say that we are making progress.

“We think it is important that we work together on an effective and diverse financial response to the current situation so that we are able to follow a balanced approach that best supports the UK’s economic recovery.”