Challenges and Opportunities Ahead for the Bridging Sector

As things stand, you would be hard-pressed to find anyone with genuine optimism for the immediate economic outlook. Inflation in the UK is already hovering close to 11%, but experts are increasingly predicting a peak of almost 19% in the early stages of next year. All of this is likely to make the current living-cost crisis seem insignificant when compared with the economic hardship to come.

Consumer confidence is as low as it gets, average wages are in no way keeping up with escalating living costs, and people are being forced to make all sorts of modifications to their spending patterns simply to make ends meet.

Sadly, experts like Nick Jones, sales director for bridging finance at lender West One Loans, only see things getting worse before they get better.

Flexible finance in troubled times

But while the overall picture is somewhat pessimistic, it may not all be doom and gloom. With the growing availability and affordability of bridging finance, more people and businesses than ever before will at least be able to tide themselves over if facing a temporary economic shortfall.

There will even be those who are able to capitalise on the economic downturn in order to make the best of a bad situation.

“There will be opportunities for customers who are looking to expand their portfolios and make investments, and we will be here to support them,” said Jones.

Elsewhere, bridging and development finance specialist at Brightstar, Stephen Watts, indicated that “bridging finance is being increasingly sought to enable buyers to put themselves ahead of their competition”.

With available housing inventory continuing to outstrip supply by a considerable margin, those able to do so are setting their sights on potentially profitable property investments. And in many cases, they use short-term bridging loans to expand their portfolios at relatively short notice.

Figures from the most recent Bridging Trends Report found that, in spite of the current economic chaos, bridging loan volumes for Q2 this year were up 14%. Throughout the first six months of 2022, the most popular application for bridging finance was picking up an investment property.

The speed and simplicity of home buyers and investors looking to take advantage of time-critical property purchase opportunities. Not to mention, jump the queue and escape the trappings of conventional property chains entirely.

Cash buyer benefits

But it is not just the UK’s more established property investors that are finding bridging finance a useful facility. Conventional homebuyers are finding it increasingly difficult to secure property purchases via conventional channels.

Today, the typical mortgage application takes approximately 12 weeks to underwrite, authorise, and issue. In the meantime, competing buyers have up to three months to submit a superior offer and beat you to the punch.

Coupled with the risk of the seller simply pulling out of the deal at any time, conventional home purchases are becoming increasingly difficult.

With bridging finance, homebuyers can gain access to the benefits of purchasing properties as cash buyers. They borrow against their current home, they fund the purchase of their next home in a matter of days, and they beat all competing bidders to the punch.

In doing so, they eliminate the risk of being gazumped at the last minute and benefit from the property price discounts afforded exclusively to cash buyers (often up to 2% of the total property price).

For as long as the economic situation in the UK remains unstable, the appeal of bridging finance will continue to grow. Particularly for those who are asset-rich but cash-poor, bridging finance can be the ultimate affordable stopgap solution for times of economic turbulence.