Is Bridging Back? What Does the Surge in 2017 Mean for the Commercial Market?
3 minute read
A survey of bridging loan brokers by MTF has found that bridging volume soared in the first quarter of 2017, with the number of brokers seeing an increase in bridging volume at 59 percent. That’s up from 31 percent in the final quarter of 2016. The most common reason for taking out a bridging loan was for development funding, with 30 percent of borrowers using bridging finance for that purpose. This was followed by the purchase of investment property, accounting for 20 percent of all the bridging loans agreed.
The Wider Use of Bridging Loans in 2017
Bridging loans are essentially a short-term borrowing solution for clients who need to facilitate a property deal, usually with a fast turnaround time. Traditionally, bridging has appealed to high-net-worth borrowers looking to use residential property as security to raise funds. However, in recent years, the market has changed and so have the ways in which brokers are using bridging for their commercial clients. Now, bridging loans can provide a speedy solution for clients across commercial bridging, bridge-to-let and bridge-to-sell, as well as light and heavy refurbishment and development finance. There are also more bridging products and lenders for commercial clients to choose from. They offer everything from straightforward, small-scale bridging loans to larger, more complex loans that are tailored to meet the specific needs of their clients.
What Challenges Does the Sector Still Face?
The results of the broker sentiment survey also revealed some of the challenges the sector still faces. 45 percent of the 100 brokers canvassed said they believed the level of competition from other funding options was the biggest challenge for the bridging finance sector at the moment. 30 percent highlighted delays as a key issue, while 15 percent said regulation was holding them back. When asked what product developments they would like to see to make the sector even more attractive to commercial clients, 40 percent said they would like to see higher loan-to-values, 25 percent said they wanted greater flexibility on commercial lending, while 15 percent wanted greater flexibility on adverse applicants.
A Strong Need for Specialist Lending
Despite the significant product developments already this year and the surging interest in bridging loans, the feedback from the brokers still identifies a need for more specialist lending, particularly for property developers. However, given the strong start to the year, the brokers expect to see continued demand for an increasingly diverse group of products that can deliver value in increasingly innovative ways. Read more about bridging loans or get in touch with our team to see if a bridging loan is right for you.