It’s official: bridging is back! Last week, Bridging Trends published its research on gross bridging lending in Q3. Completed deals (compiled using information from thirteen industry sources) amounted to more than £190 million in bridging loans – equalling the highs last seen in 2018.
For most of the industry, is the news any real surprise? After all, Q3 saw the inevitable flurry of homeowners looking to get property transactions over the line before the stamp duty holiday came to an end. But the end of the stamp duty holiday is only one part of the story.
Competition and demand for property have soared over the past year, especially as lockdowns have fuelled a surge in house moves, upsizing and new buying trends. International investors have also refocused their sights on prime London property, especially as travel restrictions have lifted and international visitors have returned to the city – sometimes for the first time in 18 months or more.
Why Bridging Finance?
With such extraordinary competition in the market, there are inevitably bottlenecks and frustrations in all corners. For the most part, the narrative has predominantly focused on the challenges of homeowners looking to sell or buy. However, some brokers, lenders, valuers, and mortgage providers have struggled to keep up with increased demand. As mortgage applications, securing valuations and ironing out legal issues takes longer and longer, it’s no wonder that borrowers started to look at other financing solutions for property purchases to get transactions over the line.
Bridging at the Top End of the Market
The end of the stamp duty holiday in September was likely to have spurred bridging loan applications overall, however, it’s unlikely to have been only driving motivator for high-net-worth individuals who opted for bridging finance last quarter.
Instead, the promise of a property purchase completed quickly and avoiding a long-winded borrowing process (often compounded by the appeal of non-bank lending) is usually enough to incentivise investors and high-net-worth individuals to explore alternative financing vehicles. As competition in the market has heated up since 2020, the benefit of bridging finance has, in many ways, become increasingly clear for investors and high-value buyers.
Prime property investors and those buying luxury property often work with advisors and, in many cases, a mortgage broker. As a result, this group of borrowers also tends to be more knowledgeable about financial products available to them than other buyers handling their own property purchase.
Where bridging finance has perhaps historically been something of an unknown to many property buyers, there’s increasingly a desire to use bridging at the top end of the market.
The trend is in part driven by mortgage advisors providing insights into the benefits of bridging and their ability to help eliminate potential misgivings from the borrower. The knock-on effect is that there’s more understanding of the benefits of bridging finance amongst investors and prime property buyers. These borrowers understand how bridging loans can be used to sidestep longwinded mortgage application processes, break property chains, and get property purchases completed faster than with traditional property financing.
In many circles, bridging finance is increasingly viewed as a highly useful tool that borrowers can leverage to attain a specific and desired outcome within a certain timeframe, and we expect this will remain the case going forward.