Nick Lawler, Head of Business Development for DPR, looks at the opportunity that the bridging and development finance market brings, this article was published in Mortgage Finance Gazette magazine, March 2020 edition
As a result of the improved economic outlook and broader political stability following the General Election result, 2020 looks set to be another positive year for the property market, including the bridging and development sectors. Undoubtedly a product that is highly adaptable, bridging finance is here to stay. The latest sentiment survey from members of the Association of Short Term Lenders (ASTL), shows that nearly three-quarters (72%) of bridging lenders expect their business to grow in the coming months and more than half of lenders expect the market to grow.
Data provided by members of the ASTL, shows that the third quarter of 2019 saw bridging loan applications growth of almost 17% on the same period in 2018, reaching £6.1 billion. With completions at over £4 billion, year-on-year annual applications reached nearly £23 billion. Accordingly, the figures suggest that bridging loan books totalled £4.3 billion at the end of the third quarter. Given the political and economic uncertainty that was affecting transactional activity in the mainstream residential and buy-to-let sectors at the time, the figures highlight strong growth in the sector.
This year has already seen another new lender enter the bridging and development sector, Atelier Capital Partners. Octane Capital has reduced its risk rating and has cut rates on its larger bridging, developer exit and refurbishment loans. Hope Capital has further enhanced its Hope Seven 5 bridging product. Ultimate Finance has announced that it is increasing the top limit on its bridging finance to £2.5 million, up from £1.5 million. Blend Network has reduced rates across its bridging and development products from 0.9% per month to 0.75%. United Trust Bank (UTB) has extended its bridging offering to Scotland. Nucleus Commercial Finance and Paragon Bank have announced a £25 million funding line to support more SMEs while Tuscan Capital has gained additional funding from a UK-based provider which will offer the capacity to increase the lender’s loan book size to over £150 million.
Continued product innovation and constantly improving pricing make bridging and development finance an attractive product proposition to a wider audience. There is a growing awareness of the role that this funding plays, not only for homeowners but for businesses and developers too. With the slow-moving property market set to speed up, this competitive sector has a real opportunity to increase its reach to more customers and extend its distribution through more brokers.
Lenders can take advantage of this opportunity by ensuring they have a technology platform that supports their broker and their customer requirements. By ensuring speedy decisions through automation and automated document management, robust rules engines can deliver a vital yes or no answer to their brokers as soon as possible.
Bridging lenders have clearly grown in confidence about the outlook for the UK economy, their own business and the bridging sector. It is, therefore, important that lenders manage their expansion, and retention, plans carefully and invest in technology that can best help them achieve their growth plans moving forward.