Bridging – an 'active and lucrative' sector

While much of the wider mortgage market is undergoing a period of extreme volatility, with the most recent concern being lenders withdrawing products with little notice only to later reintroduce deals at significantly increased rates, one area is prospering.

The bridging sector has seen completions, applications, and loan books continue to grow, according to the latest data from the Association of Short Term Lenders (ASTL).

Mortgage Introducer spoke with brokers in the space to gain an insight into the bridging sector at present.

Lucrative sector

“Bridging is the bath water thrown out by mainstream lenders that has formed a lake of milk and honey for those that entered the void,” said Bob Singh (pictured), founder at Chess Mortgages.

Singh added that this highly active and lucrative sector was now firmly the domain of specialist lenders as they grew stronger and attracted inward investment, while more typical mainstream lenders were left behind.

“With greater transparency and competition, bridging is now a mainstream solution for many to achieve their property buying ambitions,” he said.

Many bridging lenders were FCA-regulated, and therefore, Singh said, were able to deal with regulated cases.

While Singh said there were still a few kinks to work out with regards to speed, paperwork, fees and default penalties, he believed the outlook of the bridging market was a positive one.

Ashley Thomas, director at Magni Finance, said he had witnessed an increase in demand for bridging in recent times.

Thomas said bridging had gone from strength to strength, rising to the level of a mainstream product in its own right.

“It is more appealing now than ever as the gap between the standard residential and bridging rates has narrowed significantly; in some cases, there is not much difference at all,” he added.

As standard residential rates had skyrocketed in the last few weeks due to the expectation that the Bank of England would likely increase the base rate further, Thomas said bridging rates had reacted more subtly.

Wider market view

James Vince, managing director at Castle View Finance, said bridging was a fantastic tool for both regulated and non-regulated property transactions.

There was now more acceptance and education in this area, which Vince said had been helped by social media and digital information availability.

“In recent times, I have seen increasing numbers of asset-rich residential clients taking advantage of bridging to acquire quickly and beat the competition with cash buying habits,” he said.

The savvy investors among us, Vince said, had leveraged bridging for a while, using it to acquire difficult-to-mortgage properties, solve problems and then term finance out, often realising the true OMV on bridge exit, making it an ideal tool to scale and recycle funds.

He had also seen a steady flow of enquiries that converted well due to the speed and certainty of the buyers.

“With more bespoke and flexible lenders in the market, the future is a positive one for the bridging industry and more importantly for the client acquisition opportunities,” Vince added.

Why do you believe the bridging sector has seen completions, applications and loan books continue to grow? Let us know in the comment sector below.