Higher business volumes and new products show the market's growth
As the economic storm of recent years appears to be gradually passing, and the clouds of financial uncertainty show signs of dispersing, the bridging market is expected to see continued growth.
Characteristically, bridging thrives in times which are more financially challenging, offering solutions away from the mainstream, but this most recent downturn and the activity it has generated in the sector, could prove to be a springboard for greater volumes of business in the – hopefully - calmer days ahead.
Loan books in the sector continued to grow to record levels in Q2 2024, reaching nearly £8.4 billion (up 2.9%), according to the latest data from the Bridging & Development Lenders Association (BDLA). Completions also grew to a record £1.74 billion, representing a 15.4% increase on the first quarter.
As awareness grows of the sector, there have been a flurry of new product range announcements in recent days.
Marcus Dussard, sales director at lender KSEYE, believes brokers are now aware of the short-term lending option in a way that they weren’t before, and believes this will present more opportunities for them.
“With rates beginning to fall and house prices having seemingly turned a corner, we should see some of the challenges regarding exits beginning to ease,” said Dussard (pictured left). “We now have more brokers who are familiar with the sector, which is good news for the future growth of the market.
“Often, during a period of uncertainty, short-term finance comes to the fore as investors look for funding to bridge the uncertain period. The challenge, during times of uncertainty, is the exit route, whether that’s purchase or refinance.
“Brokers may have turned to bridging recently to provide funding for a period of economic uncertainty, but even as the outlook becomes clearer, bridging will still provide solutions for a vast range of requirements. You only have to look at the record lending data that is consistently published by the BDLA to see that the bridging market has been going from strength to strength in recent years.”
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What new bridging products are available?
KSEYE has just launched its new Lite product range, covering residential, commercial and mixed-use bridging products. This new product range is available for properties in London and the home counties, with Resi-Lite bridging loans starting from a headline rate of 0.74%. Commercial-Lite bridging loans start at 1.05%, and Mixed Use-Lite bridging loans start at 0.95%. The range is a response, it said, to the high volume of enquiries it has received so far in 2024.
“Don’t underestimate the versatility of bridging finance,” Dussard said, “whether it’s a chain break situation, a quick completion, business finance, refurbishment or a property conversion. Bridging offers a flexible funding solution. It’s a growing market and one that brokers should make an integral part of their toolkit.”
Hilco Real Estate Finance (HREF), the UK based specialist bridging lender meanwhile announced a new suite of lower priced lending products, yesterday, and a Q4 lending target of £100 million. Due to a lower interest rate environment and increasingly efficient internal capital, HREF is offering bridging loans starting from 0.79% per month, and expects to significantly increase market share in the last three months of 2024.
“The bridging market is currently very buoyant, with enquiries barely dropping despite the summer break,” said its managing director Sean Adams (pictured right).
There are challenges though, he noted.
“Loans are taking longer to complete than they have done historically,” Adams said. “It is hard to pin point exactly why. Sometimes it is due to deal specific complications, sometimes it is because the legal and valuation processes are taking a little bit longer - sometimes it is due to borrowers taking longer to make a decision or commit, perhaps because they are seeking term finance and bridging is a back-up.
“I also think there can be a dislocation between a buyer and seller’s view of the value of an asset and unless a seller has to sell they will hold out for as long as possible to obtain the best price. This has created increased value volatility.”
He added: “Term lenders can still be more cautious than they once were, particularly in certain asset classes, for example, office, care, retail), which means that borrowers will often have to turn to bridging finance to help acquisitions. There are, as a result, opportunities for savvy buyers to obtain very high returns on these assets due to the value volatility.”
HREF launched in 2023 to provide bespoke, flexible property finance solutions nationwide, offering short-term loans for growth, acquisition opportunities, development exits and refinancing exits, with loan sizes ranging from £3 million to over £100 million. Its achievements to date have included a £23 million facility secured against a major roadside infrastructure site and a £13 million exit loan secured against 24 London apartments.
“I would urge brokers who are struggling to obtain the required term finance, or whose clients need to move quickly to secure the purchase of an asset, to look at bridging finance options,” Adams suggested. “The flexibility and speed bridging can offer could rescue a deal.
“We are excited about the next six months and feel the bridging market will be very busy given increasing demand in the market, valuation dislocations and reduced risk appetite from term lenders.
Vic Jannels, CEO of the BDLA, believes the significant increase in business levels in Q2, despite the uncertain wider economic environment, highlights ‘the vital role’ that bridging lenders play in driving property market activity.
“The more we can build on this momentum, the greater awareness we can bring to the versatile benefits of short-term property lending and the more opportunities we can deliver to intermediaries to help their clients finance their property objectives,” said Jannels. “There will always be challenges ahead, but the bridging market is in a strong position to overcome those challenges.”
