The bridging finance market is projected to undergo significant expansion in the forthcoming years, as indicated by a recent survey conducted by Interpath and the Bridging & Development Lenders Association (BDLA) UK. Although the market shows potential for growth, concerns regarding the increasing duration for completing loans and stiff competition for loans have been raised by brokers and lenders.
A pivotal finding from the survey reveals the escalating time lag in finalising loans, leading to transaction delays. Survey respondents also expressed unease about the heightened competition for loans. Despite these challenges, 62% of respondents anticipate an increase in annual origination volumes within the market, with 92% foreseeing continuing availability or even growth of institutional funding in the coming year.
Moreover, the survey indicates a consensus among respondents that average monthly interest rates on loans are projected to decrease, serving as a key market driver. However, there is also a cautionary note as 51% of respondents reported elongated average days to complete a loan, primarily due to protracted legal processes, identified as a key challenge causing delays.
Furthermore, the survey findings highlight a bearish sentiment regarding the need for property recoveries, with 92% of respondents expecting the level of foreclosures to remain the same or increase. Additionally, the survey provides insights into average monthly interest rates, average loan-to-value (LTV) ratios, and average loan sizes, offering illumination on the current landscape of the bridging finance market.
When asked to identify the foremost challenges facing their business over the next 12 months, survey participants cited increased competition as their primary concern, followed by a decline in property sales volumes and time to sell, as well as declining property values.
Nick Parkhouse, Managing Director and Head of Financial Services Deal Advisory at Interpath, underscored the importance of the next 12 to 18 months for the bridging finance market. He highlighted the anticipation of growth, increased institutional funding, and decreased interest rates, while acknowledging the genuine obstacles in the market that necessitate attention, particularly the delays caused by legal processes.
Vic Jannels, Chief Executive Officer of BDLA, expressed optimism about the ongoing growth in the market, citing the record high of £8.1bn in bridging loan books in Q1 2024. He stressed the significance of maintaining high standards of transparency, professionalism, and customer focus to meet the mounting demand from both customers and institutional funders.
In conclusion, the outlook for the bridging finance market appears poised for growth, albeit not without its challenges. The survey results serve as a valuable resource for comprehending the present state of the market and for preparing for prospective opportunities and obstacles. As the industry navigates through the evolving landscape of bridging finance, upholding transparency, professionalism, and customer-centric approaches will be crucial in meeting the demands of the market.