Demand for bridging finance stays strong

Donna Wells, Director at F4B

The fact that we continue to see rising house prices reflects unerring demand from an array of borrowers, even during some uncertain economic times. This was evident in the latest UK House Price Index data from the ONS and Land Registry which outlined that average UK house prices increased by 10.9% over the year to February, up from 10.2% in January.

Breaking this down, average house prices increased over the year by 10.7% in England, 14.2% in Wales, 11.7% in Scotland, and 7.9% in Northern Ireland. The South West and East of England were suggested to be the regions with the highest annual house price growth, with average prices increasing by 12.5% in the year to February. This was up from growth rates of 11.5% (South West) and 11.4% (East of England) in January. The lowest annual house price growth was in London, where average prices increased by 8.1% over the year to February, up from 3.8% in January.

Despite being the region with the lowest annual growth, London’s average house prices was said to have remained the most expensive of any region in the UK, with an average price of £530,000.

Even when operating predominantly in the specialist lending markets, it’s important to keep track of more general market trends as a growing number of potential borrowers continue to drift beyond mainstream lending criteria. In addition, landlords, investors and property professionals are constantly looking to take advantage of opportunities as and when they appear.

Bridging finance

From a specialist lending perspective, demand remains strong and we continue to see innovative approaches from an array of lenders as they bid to deliver a range of options to meet ever-changing borrowing demands.

When it comes to bridging finance, Knowledge Bank’s latest criteria tracker results revealed that ‘Regulated bridging’ featured prominently in brokers’ searches in March, marking the fifth consecutive month as the most-searched term. This popularity may be partly driven by competition in the housing market as buyers use bridging loans to either avoid a chain collapsing when a seller pulls out or to buy a property before their own sells.

Complex BTL

Focusing on BTL, the tracker revealed that this sector is being dominated by searches from brokers working with inexperienced landlords. Interest in the rental market from both ‘first-time landlords’ and ‘first-time buyers’ resulted in both terms landing in the five most-searched in March.

From our perspective, here at F4B, the more complex end of the BTL space is also experiencing rising demand for houses in multiple occupation and changes in permitted development rights. In addition, a number of investors are scouring the market for suitable commercial properties to repurpose existing commercial spaces, either refitting an office to accommodate hybrid working or adapting a retail space. As also highlighted as one of the main search areas within the Tracker.

Commercial and semi-commercial

Staying on the commercial theme, the lifting of Covid restrictions and a return to city lives for many has led to an increased spotlight on the potential of commercial and semi-commercial properties, especially amongst the landlord community as lenders demonstrate a growing appetite to lend.

On subject of semi-commercial, the value attached to specialist advice around this property type is more evident than ever during these testing economic times and we have certainly seen a rise in this type of business over the past 12 to 18 months. When operating in this product arena, lenders need to follow a more structured approach and be as transparent as possible in terms of how and where they can do business, not to mention how their service levels are currently stacking up.

We work with many commercial finance specialists and these transactions tend to be highly complex ones which required a bespoke, customer focused financing solution. Finding the best fit for particular deals in a particular location comes with experience and long-standing relationship which have evolved over the years. A factor which demonstrates the valuable of cultivating these types of relationships in the modern mortgage market.

Whether this increase in demand can be classed as a longer-term trend remains to be seen as we are still operating in a market full of unknowns. However, the commercial and semi-commercial sectors are certainly areas worth following in 2022, especially if LTVs begin to gradually increase and further investment opportunities emerge.