Bridging Finance: A look back at 2021 with an eye on the future

Donna Wells, Director at F4B

As we look forward to another busy year in the bridging sector, I thought I would take this opportunity to review some of the talking points in 2021 and what changes we might, or might not, expect to see in 2022.

On entering 2021, it was clear that demand for short-term finance would hit new heights in Q1 due to increased time pressure on a growing number of property transactions as the stamp duty ‘deadline’ approached. This was certainly true, although one thing I may have underestimated at the time was the sheer number of intermediaries who turned to packagers to help their clients meet the deadline that actually wasn’t. This need for additional support could have been down a) to the sheer volume of cases on their books; b) a lack of knowledge around the intricacies attached to short-term finance; c) increased trust in packagers; d) blind panic as the deadline draw close or e) some combination of the preceding points.

Of course, the deadline was extended and additional time was created for a range of transactions but these initial conversations and dealings with a variety of new introducers have since turned into relationships which will last way beyond any stamp duty deadline. This is a period which opened brokers eyes to how packagers can become a real extension of their business and this has been arguably one of the biggest bonuses of the year for all concerned.

Another observation I made when entering 2021 was that brokers need to be thinking about a time when mainstream residential business will not necessarily be beating down their door with such ferocity and that life will become even more complex, as will the needs of borrowers.

This growing complexity has been evident across the market and throughout the year, here at F4B, we’ve had to pick up the pieces from a number of cases where introducers approached us after their client had been left in limbo by their original lender. Thankfully, we work closely with a number of lenders who have the ability, capacity and capability to step in at very short notice – when armed with a well-packaged case – and service the types of deals which could easily have resulted in huge cost implications for the borrower in question, through no fault of their own. Lenders who will remain prominent in 2022.

As I touched upon earlier, intermediary awareness and perception has risen around short-term finance throughout the year. In some ways, this has been more through necessity than choice but this is no bad thing as the benefits attached to this product type are now being much better understood from a practical sense. The trust in packaging partners has also multiplied and more brokers are now able to quickly recognise the property-related scenarios where bridging finance can be a viable and responsible solution. This was exemplified in a study from Masthaven which showed that 71% say that awareness of bridging finance is growing across the market.

When asked about what is currently fuelling this boom in bridging finance, brokers cited a number of key factors. The pandemic has caused notable disruption to the housing market and 41% of brokers said that chain breaks and mortgage delays were the most important reasons that drove customers to look for bridging finance. There’s also been a boom in DIY and refurbishments, which just over a third (34%) of brokers cited as the main reason. These were followed by: borrowers buying at auction (28%), borrowers looking to raise capital (19%), and borrowers looking to re-bridge (11%).

Over the course of the year we’ve also experienced growing demand from experienced property investors and developers. This is a trend which is expected to continue in 2022, as highlighted in recent data from Shawbrook which showed that 34% of landlords in the UK are planning to buy at least one property within the next 12 months. Of the 34% of landlords that plan to buy at least one property within the next 12 months, 14% said they aim to buy more properties than they had initially planned, showing trust in the market moving forwards. Though property values are already at unprecedented levels, there is confidence that this growth will continue over the next year, with over two-thirds (67%) saying that they have confidence in the market over the next 12 months.

Confidence is always a key factor within a healthy housing and mortgage market and with so many property professionals ready to tap into the potential on offer throughout the UK to extend their portfolios and buy in new areas, it remains high as we enter 2022. This will translate into additional business across the specialist markets and provide the opportunity for brokers and packagers to cement the relationships they formed in 2021 and work even closer to provide extra value for their clients over the next 12 months.