Bridging has graduated from being viewed as lending of last resort to a key weapon in any serious broker’s arsenal.
The image of bridging has come a long way in the last few years. Some may have viewed it as either expensive or lending of last resort, or both. But serious commercial brokers see it for what it is: a critical short-term lending tool that can be employed to solve a property funding issue with a clear exit route.
I think that the reputation of bridging has changed a lot. There are so many uses for bridging that it is an additional product to have at your disposal. If you are an adviser, you need to be talking about mortgages. You need to be talking about second charges. You need to be talking about bridging and development, and if you are not, and you do not include bridging in your suite of products, then the chances are that the client is going to get that product from someone else.
Bridging is a means to an end; it stops deals falling apart. It’s the glue holding the property market and the deals within it together.
Interestingly, it is also a lot, lot cheaper than it used to be, so the margins between mortgage and bridging rates are not that far apart anymore. The regulation of residential bridging and some lenders’ embracing of Consumer Duty has led to far greater pricing transparency in parts of the sector.
Regulatory creep has meant the regulation of the consumer bridging market is often read across to the non-regulated, commercial part of the market. This has brought clarity and standardisation, including certain disclosure rules to the unregulated market, making some deals look and feel more mainstream than they’ve ever felt before.
The realities of retrofitting
Sponsored by Skipton Building Society for Intermediaries
Opportunities this year
The two base rate cuts last year and clarity post-election and Budget brought a confidence boost and more energy to the residential housing market. Bridging will always be there to help regarding chain breaks and auction finance, but the opportunities are huge across both regulated and unregulated markets.
For example, the government continues to feed infrastructure investment funding out to councils across the UK, opening up further development opportunities as planning changes also start to take hold.
First-time buyers, already at some of the highest numbers for years, are surging to buy ahead of the stamp duty cliff edge deadline on 31 March this year, when the ‘nil-rate’ band for first-time buyers is set to reduce from £425,000 to £300,000 in England and Northern Ireland.
Sellers are also likely to outstrip buyers next year, which might encourage gazundering – the practice of lowering an agreed offer just before exchange, spurring the urgent need for regulated bridging funds.
The outlook is uncertain in terms of when the base rate cuts will come, but the trajectory is clear, suggesting we’ll see a more confident market this year than last. As a bank, we’ve just had our second anniversary and already hit profit in year one. So, it seems to me, things can only get better this year, with so many more factors in our favour.
