Why is bridging outperforming other markets?

Expert identifies trends in the bridging space

Why is bridging outperforming other markets?

Bridging provides transitional finance that can help customers overcome a short-term hurdle in order to achieve their long-term objectives and, in an uncertain economic environment, like we have currently, there are many of those.

Mortgage Introducer reached out to an expert in the bridging space to uncover why the sector is outperforming others at present, and expectations for the industry over the remainder of 2023.

Bridging loans – what’s driving interest?

Vic Jannels (pictured), chief executive of the Association of Short Term Lenders (ASTL), said bridging is outperforming other areas of the housing market at present due to its speed and flexible nature.

“Bridging can support homeowners who are in a position where they need to complete on the home they want to purchase before the funds are released from the sale of their existing property, perhaps because their sale has fallen through,” Jannels said. With the buying process taking longer and term lenders repricing frequently, he added that this scenario is an increasing trend.

Another growing trend, Jannels said, is buyers using bridging to put themselves in a stronger position when choosing to downsize from their current property. The wave of multiple interest rate rises in recent months, Jannels said, has made servicing a mortgage more expensive for everyone taking out a new deal.

“For those homeowners who may not have considered downsizing previously, remortgaging on to a higher rate, and much higher monthly payments than they are used to, can provide the stimulus to make them think about a move to a smaller property,” he said.

Jannels added that investors too are making use of bridging finance to help them achieve their objectives, often as a way of making greater returns.

“Property refurbishment or conversion, for example, can help increase capital and rental value, or taking bridging finance to address a lease extension required on a flat where the remaining lease term might otherwise be considered unmortgageable,” Jannels said, as examples.

Choosing bridging over other options

Awareness of bridging finance, Jannels said, is growing among brokers and customers, and so there is greater understanding of how it can be used as a short-term, flexible solution.

In addition, Jannels said the reputation of the market continues to build and, with a highly competitive lender environment, rates are reasonably priced making it a viable option.

“Speed of transaction is also important and bridging lenders can mostly fulfil this need for the consumer,” he said.

That said, Jannels added that confirming a demonstrable exit route remains key at all times.

Expectations for the bridging market in 2023

Jannels is expecting for bridging market to continue going from strength to strength over the remainder of 2023.

“The launch of the Certified Practitioner in Specialist Property Finance (CPSP) will help to increase standards and instil greater confidence,” he said.

As more brokers engage with the market, Jannels believes they will become more confident in using bridging as a solution.

Given the ongoing challenging economic environment, however, Jannels said it remains vitally important that lenders take a robust approach to underwriting to help ensure the market continues to grow in a cautious and sustainable way, so that it can help even more customers to finance transitional periods in the future.

Have you seen the bridging market outperform other sectors? Let us know in the comment section below.