The UK bridging sector is burgeoning. This is a market which has grown from under £3bn in 2020 to over £10.9bn in 2024, and looks set to keep on building.
Everyone – from funders to lenders to brokers – seems to have woken up to the benefits of bridging in recent years, and with good reason. Here is a type of flexible short-term finance which can be used in a wide range of circumstances to help people onto the next stage of their property journey, when a traditional mortgage cannot.
Bridging is no longer the expensive loan of last resort offered by a handful of providers, which it was perceived to be years ago.
Today, it has rightly evolved into a sensible solution for multiple borrower types, provided by a large and growing range of specialist lenders, a solution which every broker should have in their toolkit.
In fact, the biggest downside from a broker perspective is that the market has become crowded and more difficult to navigate, with dozens of lenders offering numerous product ranges with widely differing criteria to cater for a raft of different bridging borrower needs. And it’s a big raft.
Finding the answer
Bridging can be the answer for borrowers on a broad spectrum of scenarios.
They might be the more traditional type of residential homebuyer who wants to buy their next property before their last one has sold, possibly because there has been a break somewhere else in the chain.
They may be an older person who has reached the stage where they want to move quickly to be closer to family, and need to snap up a bungalow or retirement flat.
They might have inherited a property and need to raise capital against it quickly for legitimate reasons, such as a recent case we helped place where the inheritor needed to fund a family member’s medical treatment abroad.
They could be a buy-to-let (BTL) landlord looking to purchase at auction, or convert a single residential property to a house in multiple occupation (HMO), or raise capital to invest in their next rental property as a cash buyer.
The list of possibilities – and solutions – is endless, and that can be a challenge for brokers unfamiliar with the broad range of bridging providers and their smorgasbord of products and criteria.
But brokers should not let this array of choice put them off.
Rely on referrals
It is simple to refer a bridging case on or to partner with a specialist broker, who can help place your deal with the most suitable lender or arrange the whole thing for you.
Forming such a partnership means you don’t have to say no to a potential client, and that will become increasingly important as you are likely to see more customers coming through your doors in need of bridging, if you haven’t already.
For example, in recent years we have seen a huge surge in the number of buy-to-let landlords looking for bridging finance to purchase at auction and in those looking to convert single properties to HMOs.
This is a factor of both the challenging economic environment, and the resulting tightening of criteria among the buy-to-let providers.
With higher interest rates and steeper purchase taxes squeezing margins, buy-to-let landlords have been revising their strategies to keep their businesses on track.
Once upon a time, a landlord could buy a standard property, rent it out to break even after costs and look forward to the capital appreciation when they sold up 20 years down the line.
With higher borrowing rates, more punitive taxes, more legislation and fears around future Capital Gains Tax (CGT) rate rises, that is no longer a viable business plan.
Those still in the market for expanding their portfolios are increasingly looking to buy cheaper properties which need work so they can quickly add value by renovating, or to take a single property and convert some of the living areas to bedrooms as an HMO and maximise their rental income that way.
We have dealt with more and more landlords and their brokers buying run-down properties at auction – a process which has to be turned around within 28 days.
Bridging finance, which can be arranged very quickly, can be ideal solution in terms of turnaround. It can also be the only solution if the property in question does not have a functioning bathroom or kitchen, for example.
In either scenario the client usually needs to have a bridging loan arranged and also a buy-to-let mortgage lined up which they can ‘exit’ onto after the renovation has been completed.
It can be a complicated demand for a broker who is not experienced in both fields – but one easily remedied with the help of a specialist broker partner. HMO conversions fall into the same camp.
As demand for bridging finance grows, more and more brokers will be faced with the opportunity to help more clients with multiple borrowing needs.
Don’t let fear of the unfamiliar restrict the growth of your business. When it comes to bridging, ask an expert for help – we can do this together.
Jason Berry is group sales director at Crystal Specialist Finance
