According to the results of the inaugural Interpath and BDLA UK Bridging Market Survey, the majority of brokers and lenders working in bridging finance expect the market to expand over the coming year.
However, participants in the survey also warned that the growing time lag in completing loans was causing delays in completing transactions, raising fears over the intense competition that exists for loans.
The Interpath Bridging Market Survey monitors trends in the UK bridging finance sector, collecting industry insights from brokers, lenders and other specialists. It was conducted in partnership with The Bridging & Development Lenders Association (BDLA), formerly known as ASTL.
62% of respondents expect annual origination volumes to increase, whilst 92% believe that institutional funding would either remain stable or grow over the next year.
However, caution remains as 51% of respondents reported that the average days to complete a loan was increasing, which many believe is due to a slow legal process. 92% of respondents also expect foreclosures to remain at the same level of increase.
A profile of bridging finance loans were also constructed by the UK Bridging Market Survey, which revealed that 51% or participants cited the average monthly interest rate for loans from the past 12 months to be 1% to 1.25%. It was also indicated that prices are trending upwards, with 8% of respondents stating that loans were priced above that level.
65-70% was the most common bracket for the average loan-to-value (LTV), followed by 60-65%. The average loan size seems to have increased from £300,000 to £400,000 to more than £600,000.
The average loan term appears to be between 9-12 months, according to respondents, which is in line with the short-term nature of the market.
“The next 12 to 18 months will be pivotal for the bridging finance market,” said Nick Parkhouse, Managing Director and head of financial services deal advisory at Interpath. “The industry expects growth, more institutional funding, and a fall in interest rates, but there are still some real drags on activity, not least in the delays caused by legal processes on the time to execute a transaction. While credit quality will increase, the results show us that there is still concern over defaults with fears over foreclosures remaining front of mind.
“One thing is certain – there will be more competition, which has taken over as one of the biggest concerns in the industry. As demand for financing for arrears builds, propelled by a decline in property sales volume and increase in time to sell, we’ll see more capital finding its way into an already busy and fragmented market and spark an intense fight for loans, including new entrants. The rest of 2024 is set to be a lively period for bridging finance.”
Vic Jannels, Chief Executive of the Bridging & Development Lenders Association, added: “It’s clear that bridging is an increasingly vital cog in the workings of the overall UK mortgage and property market. Latest data from the BDLA shows that bridging loan books hit a record high of £8.1 billion in Q1 2024, and this survey confirms the level of optimism for ongoing growth in the market.
“There will be challenges, of course, but by maintaining high standards of transparency, professionalism and customer focus, we will be well placed to meet the growing demand from both customers and institutional funders.”
