Bridging Finance Records Records Impressive First Quarter Performance
According to the latest Bridging Trends report, total bridge loan transactions for the first quarter amounted to £156.78m, a significant increase of around 8.5% on the same period. last year.
Evidence suggests that more borrowers than ever before are using bridge financing to speed up and simplify real estate transactions, avoiding the complications and delays of setting up a traditional mortgage.
For four consecutive quarters, the main reason for bridge financing in the first quarter of this year was the purchase of an investment property – 26% of all bridging loans issued were used for this purpose. This is followed by bridge financing to accelerate real estate purchases, accounting for 23% of all loans issued during this period.
Bridging loan underwriting costs also fell in the first three months of the year, from 0.77% at the end of last year to a new average of 0.71%. Demand for regulated bridging loans is also up, accounting for 43.9% of all loans issued, up from just 36% in Q4 2021.
Interestingly, bridging loans for business purposes saw the biggest drop in demand, accounting for just 10% of transactions in the first quarter of 2022, compared to 15% at the end of last year.
Borrowers continue to seek innovative alternatives
Speaking on behalf of Sirius Property Finance, Head of Corporate Partnerships Kimberley Gates expressed no surprise at the outstanding performance of the bridge sector in 2022 so far.
“It is not surprising that bridge loan operations increased again compared to the previous quarter – the real estate market continues to be turbulent for a variety of well-known reasons, so borrowers are looking for increasingly innovative ways to structure their debt,” she says.
“The stigma surrounding bridging also continues to fade as more investors, developers and owners begin to see it as a useful tool to achieve their real estate goals and no longer as a last resort.”
Similarly, Head of Bridging at Clifton Private Finance, Sam O’Neill, spoke confidently about the direction the sector as a whole is heading:
“It’s good news across the board… increased borrowing and lower rates – what’s not to like? The substantial increase in gross loans is no surprise, looking at our numbers, inquiries are up, requests are up and completions are up,” he said.
“An increase in chain-breaking transactions and regulated bridges is another positive sign. A growing number of owners see bridge financing as something they can rely on and trust as a financial product. When we’re looking to make sure the industry is moving in the right direction, we can’t ask for more positive feedback than that.”
cash is king
Dale Jannels, MD at Impact Specialist Finance, highlighted the important role bridge financing plays in helping landlords exit traditional real estate channels and complete transactions without the usual delays or complications.
“This latest Bridging Trends [report] emphasizes more than ever that cash is king,” he said.
“This applies to owners wishing to have their offer accepted before they have sold their own property, as well as investors wishing to raise funds quickly to invest in stock or renovate the existing one to obtain better returns for example.”
“The shortage of suitable housing will undoubtedly lead to increased volumes in the bridge industry for the foreseeable future.”