Bridging – The unlikely hero of property finance

2022 has so far presented a myriad of challenges for property buyers and businesses alike as they continue to grapple with the rocky economic landscape.

From continued Covid-19 fallout, the ongoing conflict in Ukraine, and to the cost of living crisis, navigating these waters continues to be difficult.

These uncertain times have been the catalyst for increasing numbers of property buyers being shut out of the market by lenders’ constantly fluctuating criteria, their own adverse credit histories or processing delays.

The need for dynamism, agility and speed has never been more important in the world of property finance, where bridging has fast become the unlikely hero.    

So it’s not surprising that Crystal Specialist Finance have seen bridging account for more than a quarter of all enquiries in 2022 so far and Bridging Trends 2022 reporting that regulated bridging made up 56% of bridging transactions in Q1 22; up 20% on the previous quarter.

When it comes to meeting short-term funding needs, bridging can be used in a variety of ways for both individual buyers and businesses, meaning it’s fast become the ace in the pack for brokers with problematic deals.

Bridging the gap for individual buyers

Every buyers’ worst nightmare is when they lose out on a property because their mortgage application has got stuck somewhere in the cogs of the lenders’ underwriting machine.

Irrespective of whether the property is a new home or an investment vehicle, bridging is increasingly being used as the ‘get out of jail’ card  by those who find themselves with a financial shortfall or faced with unexpected delays or blockers (such as adverse credit), when trying to secure more traditional funding lines.

Whether it’s someone else in the chain slowing down the purchase or due to the buyer not being able to sell their own home, bridging can act as the proverbial bolt cutter to shatter the toughest of chains.   

But the appeal of bridging doesn’t end there.

How bridging can give businesses a boost

Increasingly, bridging finance is being used by SME businesses to accelerate their post-pandemic strategic objectives and to stimulate recovery and growth in ways that commercial mortgage brokers perhaps did not know was possible.

For example, bridging finance is increasingly being used by business to acquire stock to meet renewed demand or to extend a product’s availability.

In addition to providing additional capital to stimulate growth or cover a shortfall in cash flow, bridging finance is also able to facilitate funding for expansion or creation of a new business venture.

Why is bridging becoming so popular?

  • Competitive products

Increased challenges faced by borrowers through the home buying process has encouraged new entrants to become bridging lenders.

Most of these have quickly adapted their models to better serve the regulated market. Similar to the specialist lending landscape of the early 2000’s, the increased competition to win market share has driven down interest rates. For example, the average monthly interest rate on a bridging loan fell to a historical low of 0.71% in the first quarter of 2022, down from 0.77% in Q4 2021.

Bridging pricing and the associated fees are about the keenest they have ever been and the LTVs available for both heavy and light refurbs are at all-time highs.

While in the past, bridging was seen as the last resort to get a troubled property deal over the line, it is increasingly becoming a mainstream choice when time is of the essence.      

  • Speed and flexibility

Bridging is incredibly useful when buyers need to cut the Gordian Knot.

So, when a deal gets into a bit of a bind, regulated bridging can cut through the strings to free to deal and get it to completion with breath-taking speed. At Crystal Specialist Finance, the fastest we have completed a bridge is a remarkable 8 hours. While typically it takes around 56 days to complete a bridging deal, this is over twice as fast for the more pedestrian residential mortgage, plodding in at 133 days.

A driving force for completion

High street banks and building societies have remained largely uninterested in the perceived risky world of bridging finance, which has enabled the nimble specialist lenders to seize the opportunity and develop innovative lending solutions which have contributed to the housing market remaining buoyant.  

Not only that, but specialist underwriters are also industry experts and highly skilled when it comes to complex cases – being both deft and meticulous when it comes to packaging applications.

In the increasingly challenging world of property finance, specialist brokers are coming into their own and saving many a deal for both intermediaries and their clients. The powerful combination of a specialist’s knowledge, close relationships with the UK’s lenders and integrated technology systems are increasingly making them the first call for mortgage brokers with time pressured, complex deals.

All hail, Bridging Finance!

Jason Berry is group sales director at Crystal Specialist Finance

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