Bridging business in 2022 and role of the packager

Donna Wells, Director at F4B

As we enter Q2, there remains huge optimism around the size and scale of the bridging finance sector in 2022. This optimism comes on the back of a record period for bridging lending in the final quarter of 2021, with completions and applications both reaching an all-time high. The figures, compiled by auditors from data provided by ASTL members, showed that bridging applications reached a record high of £12.7bn in the quarter ending December 2021 – an increase of 65.4% on the previous quarter, which itself was a record period at the time.

The value of completions increased by 19% in Q4 2021, when compared to Q3, reaching a new record of £1.2bn. This also led to a further rise in the value of loan books, £5.08bn at the end of December up from £5.07bn. According to the data, average LTVs increased slightly from 59.8% in Q3 to 61.2% in Q4. The value of loans in default continued to fall, for the fourth consecutive quarter, showing a decrease of 7.6% over September 2021. In addition, the number of repossessions also fell slightly.

As highlighted in the commentary around this data, it represents a clear sign that the bridging sector is becoming ever more established as an invaluable part of a broker’s toolbox. Generally speaking, it’s a product which is being more widely viewed as a proactive and viable solution by borrowers and the broker community. A combination which bodes well for the market to grow even further.

Bridging business in 2022

From an F4B perspective, this continued shift in perception has translated into heightened enquiry levels in Q1, and this is a trend which is likely to carry on throughout the year. As evident in a survey from Glenhawk which highlighted that 84% of brokers expect to write more bridging business this year than in 2021.

The research found that there is significant capacity amongst brokers for more business, with just 14% saying that they had turned away more bridging cases in the last 12 months compared with 57% who could place more. In terms of ongoing opportunities, despite 74% of brokers believing that Permitted Development (PD) will enable them to arrange more bridging cases, borrowers have been slow to embrace the 2021 changes to PD rights. Nearly three quarters of brokers said that either less than 25% of their landlord clients (43%), or none (26%), have asked for them to arrange bridging finance relating to PD. Over half of respondents (54%) cited a lack of suitable properties as the main obstacle for this lack of demand, followed by fluctuating valuations and access to finance.

The survey also revealed that lenders are exercising caution, with 60% of brokers citing the placement of higher LTV cases as their biggest challenge, followed by securing finance for foreign nationals (37%). For borrowers and brokers new to the market, how interest is calculated/repayment terms is the most confusing area (49%), followed by the legal process (39%) and the application process (32%).

In addition, the results from Knowledge Bank’s latest criteria tracker revealed that ‘regulated bridging’ continues to dominate searches in the bridging sector, with February marking the fourth consecutive month that it was the most-searched term. Outside of regulated searches, for the first-time in four months, brokers were searching in numbers for ‘commercial property’.

As the needs of the UK workforce change, many business owners are having to adapt commercial spaces, either to accommodate hybrid working, or to completely repurpose the property. With bridging loans playing a more prominent role in this modification process.

The role of the packager

All of which makes for an increasingly complex set of borrowing scenarios, especially for those brokers who may not write this type of business on a regular basis or be aware of a range of lending propositions which meet the ever-shifting demand of business owners, developers, investors, landlords and residential transactions which benefit from funds being raised quickly. Or be able to gain access to all the available products.

It’s always been our job to know exactly what types of cases each and every lender will accept. Only then can we ensure that applications are packaged correctly so they can be processed at the first time of asking and maintain the right levels of ongoing support to ensure they move swiftly to completion. As a company with over 20 years’ packaging experience, we know how tough this sector can be for advisers but we also appreciate also just how far it has come from a product, criteria, rate and professional standards perspective. And whilst there is still some room for improvement, it’s a sector which continues to go from strength to strength.