Everywhere you look, there are warnings that not only are things tough at the moment, they are only going to get tougher. Recently, the Bank of England said that inflation is possibly going to hit 10% this year, but there’s not a lot it can do about it.
In the context of these challenges, it’s all the more impressive that the bridging market is performing so well currently.
In May, industry research from Bridging Trends suggested that average rates charged on bridging loans have dropped to new record lows. This has been driven by the high level of competition in the market — there are so many lenders actively battling for business in the bridging sector, which recognise that price is an excellent way to stand out. It’s certainly not the only way to do it though, as we have also seen a host of finance providers adopting more creative approaches to criteria and the cases they will consider.
Just last month, we helped a client borrow more than 100% by putting in additional security in the form of land. The deal was structured in such a way that the only upfront costs were the valuation fee and the legal costs. This a good reflection of the health of the market right now.
We have developers and investors looking to get good housing stock back out into use, coupled with strong and consistent demand from would-be buyers and tenants. As we saw during the pandemic, the property market is pretty robust, capable of maintaining strong activity levels even in difficult circumstances.
Giving projects the green light
The message is clear — lenders are open for business and keen to consider projects from property investors. However, if there is to be further economic trouble ahead, this may be as good as the bridging market can get, at least over the short- to medium-term.
That’s important for advisers to bear in mind. There will be clients approaching them, looking for help with property projects, and bridging finance might be a perfect funding option for them, in which case, it could be vitally important for them to crack on now.
The reality is that if the predictions of future more challenges prove to be correct, then lenders might respond by tightening their criteria, increasing rates, or just becoming a little more choosy over the deals they are willing to take on.
Property remains a compelling investment, which is why some will still be keen to get on with refurbishment and development projects. However, dithering over proceeding with those projects could mean they become more expensive.
Making the most of experts
It’s important to remember that the bridging market remains a particularly specialist one. While we were able to help a client access funding at greater than 100% LTV, that isn’t the sort of deal that is going to be available from all lenders, nor to all advisers.
These unusual cases are only possible because of the long-standing relationships built between lenders and distributors, and the expertise and understanding that come from working in this sector for a long time. It’s a question of being able to package a case in such a way that makes it easy for the lender to say yes.
These relationships don’t happen overnight, which is why it’s such a good idea for advisers to think carefully about how partnering with an experienced distributor can help their clients to access bridging finance as quickly and smoothly as possible.