Experts have discussed conditions in the bridging market
While the broader mortgage market has encountered many ups and downs in recent times due to market conditions, some experts believe the bridging market has had an easier time of it.
Mortgage Introducer has spoken with several experts in the sector to get to assess how the bridging market is fairing at present, given market conditions.
Roxana Mohammadian-Molina (pictured), chief strategy officer at Blend Network, said the bridging market was doing better than other markets at the moment.
“That is due to a variety of reasons; in some cases, this is because people are moving debt to higher leverage as a holding pattern,” Mohammadian-Molina said.
While in other cases, Mohammadian-Molina said the popularity of the bridge product was due to refinancing issues.
For example, she said the most popular exit strategy for a development finance loan was either to sell the property or to refinance onto a mortgage once the property was built.
However, Mohammadian-Molina said at present, it was taking longer to offload properties, without compromising on the asking price, and it was taking much longer for banks to refinance; so, this meant clients were often having to use bridge loans in the meantime.
“Last but certainly not least, we see some people holding properties in the short term in the hope rates come down,” she added.
Mohammadian-Molina had seen many customers choosing bridging over other options in the current market, and she believed that was because bridging could be more readily and more flexibly available than other forms of funding.
In other words, she said bridging was providing flexibility which is much needed in the current market environment.
“As mentioned, many people are waiting with the hope the market conditions improve or rates come down; in such situations, bridging is a good and flexible option for the period in between,” Mohammadian-Molina said.
Molly Markey, managing director at Finanze, said as a bespoke lending arm, she had noticed a significant increase in both first-time and seasoned investors exploring more creative financing solutions to counter the increases in the base rate.
“One example of this trend was the growing interest in off-market property acquisitions at discounted prices paired with the utilisation of OMV lending, instead of lending based solely on the purchase price,” she said.
Markey said the bridging market remainsed buoyant as investors sought lending options that allowed them to enhance property value prior to selling or securing long-term financing.
Ian Hepworth, director at Funding Solutions UK Limited, said the unsecured loan market cannibalised itself with the government-backed loans during the pandemic.
However, now, he added that many businesses were using the secured loan market to obtain funding.
“Bridging finance allows business owners to use property that is within or outside a company to raise funding, with flexible terms and transparent rates it is continuing to prove a popular source of finance,” Hepworth said.
Meanwhile, Christian Duncan, managing director at Manchester Mortgage Centre, said in 2023, he had seen very few enquiries for bridging finance, despite it still being competitively priced.
“For anybody looking to secure bridging finance, the focus has always been the repayment vehicle; the most common being refinancing onto a traditional first charge buy-to-let mortgage, or sale of the investment,” he said.
As a result of buy-to-let rates increasing, Duncan had seen more and more deals not fit after assessment.
He added that this was leaving investors cautious and insecure about how the market would look when they came to secure their exit strategy.
“I predict that in 2024 and 2025 however, we will see a huge increase in investors looking to secure those deals following the deflation of the UK property market,” Duncan said.
How do you believe the bridging market is fairing at present? Let us know in the comment section below.