2015 was the year the bridging sector really came of age. One reflection of this is the way many lenders settled down into the areas they are most comfortable with. For example, some lenders will favour a certain geography, others will prefer a certain asset as a security, while others will have grown a development or buy-to-let bias.
This increased delineation has really benefited brokers and master brokers like ourselves as it means we immediately know which lenders will have an appetite for a certain loan, which gives a lot more clarity and certainty. The result is that completions have genuinely sped up and the sector has become much more streamlined.
In 2015, we have also seen a lot more innovation in short-term finance, from bridge-to-let and and ‘office-to-resi’ to heavy refurb, light refurb and development. Again, this has stemmed from the fact that lenders have now found their respective niches and are expanding their propositions accordingly. When you are comfortable with a loan type, you start innovating around it.
Given the ongoing housing shortage, it’s no surprise that we have seen a lot more interest from lenders in development finance specifically during 2015 — whether entering it for the first time or improving their existing product offering. Lenders are also increasingly offering development loans beyond the capital where property investors believe there is more value. The M4 corridor and Crossrail route, from Reading to Essex, have seen particularly strong demand for short-term development finance loans this year.
Spotting an opportunity
On a broader note, one thing I have definitely noticed in 2015 is how brokers have become much better at identifying a bridging opportunity. Many of the brokers we work with now have a 360 degree approach to property finance and there’s no doubt this is benefiting their clients. Today’s brokers are a lot more rounded than they were pre-2008.
2015 will also go down as the year the number of short-term lenders reached saturation point. The sector is now splitting at the seams. It’s not hard to see why the number of short-term lenders has soared in 2015: in the low interest rate environment we have been in for so long, the returns available to investors through bridging have proved irresistible.
Now don’t get me wrong: choice and competition are a great thing and the market we have today is a vast improvement on the one we had pre-2008. But the size of the market brings a new challenge: to ensure standards remain high across the board. The bridging market will never be mainstream but it now has a much bigger profile and, collectively, we all need to live up to it.
A new breed of lender
Something that’s also become more and more evident during 2015 is the difference between the new breed of generalist lenders that have entered the sector and the ‘old school’ bridging finance providers — a difference that is especially pronounced in the way cases are underwritten.
Some of the newer entrants have more of a high street approach to underwriting, where the client’s credit profile and financial history will figure more prominently. For the traditional bridgers, by contrast, the focus is often far more on the asset, or underlying security. It’s an interesting, and perhaps inevitable development as the sector grows. It certainly shouldn’t be a problem if you know which lenders will be comfortable with a specific type of borrower and set of circumstances.
Overall, I’m glad to say that 2015 has been a hugely positive year for bridging. The sector is bigger and healthier than it has ever been and the choice available for brokers and their clients is exceptional. Next year, we would like to see more of the same.