By Matthew Dilks, Bridging and Commercial Specialist, Clever Lending
It is often said that out of chaos, comes opportunity, and that is certainly true of the bridging sector. This area of the specialist lending market has seen substantial growth amid the global and domestic uncertainty of the last few years, with enquiries up 64% in the first three months of 2023, compared to the final quarter of 2022, according to recent figures from Bridging Trends.
Navigating Challenges with Short-Term Financing
Regulated bridging in particular has seen a surge in popularity, accounting for 46% of all bridging transactions in this time, as awareness of the sector continues to increase with both brokers and residential homeowners starting to acknowledge the benefits of using short-term financing to help them navigate the challenges of buying a property in the current economic climate.
While recent media reports of rising interest rates and a faltering housing market have certainly been plentiful, talk of the market’s decline are somewhat alarmist. Consumer appetite for buying a property remains high and there will always be a need to address the home financing requirements of residential consumers.
Admittedly, the current volatility in the mortgage market coupled with the squeeze on income due to the cost of living crisis is presenting some challenges for those customers looking to refinance, but the needs of consumers do not stop just because market conditions are considered to be less favourable.
The Role of Regulated Bridging Loans
In fact, navigating these obstacles is certainly achievable and short-term financing solutions such as regulated bridging loans are increasingly being used to help bridge the gap between buying and selling a property and for chain break purposes.
The use of regulated bridging for chain purposes alone is now the most common reason why consumers take out the product and accounted for 25% of all transactions in Q1 2023 according to Bridging Trends, a jump from 15% on the previous quarter.
This uptick in demand is unsurprising as using a bridging loan for chain break purposes allows homeowners to quickly raise the funds needed to circumvent the problems associated with property chains as it enables them to purchase a new property outright before repaying the loan when they sell their existing home.
This can help to provide surety around the property purchase and help to prevent the costs and delays that can sometimes come with a sale falling through. It can also help to prevent the buyer having to sell their current property at a lower price simply to ensure the sale goes ahead.
A regulated bridging loan is also a useful tool for brokers with clients looking to downsize, as it provides them with the opportunity to unlock equity in their current home and use the cash to purchase a smaller property without the pressure of being rushed.
It also offers the client the freedom of being able to choose when to sell their current property, rather than reacting to the changes in an increasingly volatile economy. This can prove extremely attractive to those who want to move on their own terms and not feel rushed into making a decision.
The speed at which the funds can be released also makes regulated bridging products an attractive proposition in an ever-changing market as they allow consumers to move quickly as applications are often processed in a matter of weeks. In all cases, the client will need to have a clear strategy for exiting the loan, which is often the sale of an existing property.
Guiding Clients with Specialist Support
Brokers unfamiliar with this area of the market, but with clients who could benefit from a regulated bridging loan, can refer clients to specialist master brokers such as Clever Lending who can guide you through the process and help you navigate this growing area of the mortgage market while continuing to meet the needs of clients.