“As buy-to-let investors, in particular, continue to look for ways to increase their returns, we would expect the demand for bridging to grow further.”
When a room full of brokers were asked at a recent industry event how many had completed a bridging case in the last twelve months, two-thirds of the audience raised their hands.
This was great to see and shows how far the industry has come in educating and making brokers aware of the opportunities and possibilities open to their clients through bridging finance.
I suspect if I were to have asked the same question just two years ago, the response would have been very different; with just a smattering of brokers raising their hands.
As awareness around bridging continues to increase, it is vital brokers are working with the right partners throughout the transaction, such as solicitors and valuers who understand this type of lending.
Bridging transactions can move quickly, and obtaining the right valuation is key to determining how much the client can borrow. A bridging loan is always secured, which is why the valuation process is so crucial and needs to be carried out by a member of the Royal Institution of Chartered Surveyors (RICS).
Whether the loan is for refurbishing a property or to prevent a property chain break, lenders need to be sure that the valuation they are receiving is accurate if they are to lend against it. For refurbishment properties and those bought at auction, this can be particularly important, as the property might be in a state of disrepair or dilapidation, or have some structural issues that could affect the property’s value and how much a lender is willing to lend.
There may also be a sense of urgency around the need for the valuation.
The last twelve months have seen somewhat of a boom in investors looking to acquire a property bargain at auction. This has also helped boost the bridging sector’s popularity, with bridging finance being the obvious and quickest solution for such clients.
Figures from Auction House – the UK’s largest residential and commercial property auction company – show UK property auctioneers sold 4,841 properties during 2023 – this is more than ever before in the company’s history – and up 22% from 2022.
Through both live stream and online auctions a total of 6,622 properties went under the hammer – an increase of 34% year-on-year.
Property Finance lender MT Finance’s Bridging Trends data also showed a steady demand in bridging loans for financing an auction purchase during 2023 with 7% for this purpose in the fourth quarter (Q4).
Given some of the slowdown we saw in the property market last year, it was also interesting to see that the most popular use for bridging finance in Q4 was to fund an investment purchase, accounting for 24% of total transactions, according to MT Finance’s data.
The bridging sector overall saw record lending towards the end of 2023, with the Association of Short Term Lenders (ASTL) reporting its members’ loan books hit a record high of £76 bn in Q4.
As buy-to-let investors, in particular, continue to look for ways to increase their returns, we would expect the demand for bridging to grow further. As bridging increasingly becomes an important business area for brokers, forming strong relationships with valuers and other experts throughout the chain will allow cases to move forward in a professional and speedy manner.
And who knows, if I ask the same question in another two years, we might see a unanimous show of hands from brokers.