When lenders became more averse to risk than ever as a result of the economic chaos of 2008 and became more cautious in their lending, short term lenders found themselves in high demand.
Now, a decade on from the crash which presented so many opportunities to bridging lenders, providers say the product has moved from being a niche form of lending to an “indispensible tool.”
“Summing up the changes as succinctly as I can, after the credit crunch bridging lending established itself as the sector which could provide valuable short term liquidity in the face of the withdrawal of mainstream banks,” says Narinder Khattoare, group operations director at Kuflink Bridging.
“It gave businesses and private individuals the breathing space to arrange longer term financing when it was more difficult to arrange. As the economy has improved, bridging and short term finance has established itself as an indispensible tool providing funding in a bewildering range of ways. I would now characterise bridging as the Swiss Army knife of the lending market.”
Challenger bank transformation
Matthew Tooth, chief commercial officer at LendInvest says the bridging market is “wildly more attractive” now to potential borrowers than at any time in the past 10 years.
“The entry of challenger banks and their subsequent competition on headline rates has transformed the market,” he says. “Niche players continue to creatively explore non-price competition on speed, service and customisation which make a big difference when coupled with the current low interest environment.”
Indeed, it was not just the lack of mainstream finance that fuelled the bridging boom but also the improvements to products.
“There are now a plethora of lenders who are fully FCA regulated and can give the client that short term requirement when a mortgage doesn’t complete in time or a house has not sold in time, thus ensuring that the purchase of a residential home can complete,” says Richard Deacon (pictured), sales director at Masthaven Bank.
“Long gone are the days when bridging finance was a loan of last resort. With rates now from as low as 0.48% per month, there is a genuine opportunity for the savvy broker to have bridging finance in their armoury to help their client who requires short term finance quickly.
“Pricing has also changed a great deal in the last 10 years. I recall when lenders offered nothing under 1%, nowadays it is rare for a lender to offer anything over this rate. I think pricing has come down in the main due to the challenger banks offering bridging loans as well as other forms of specialist lending, combined with the fact the bridging market as a whole has gravitated towards the forefront of the introducers mind.”
David Pinnington, head of intermediary relations at Finance 4 Business say client profiles have changed too.
“Post credit crunch we have seen the emergence of a new breed of lenders, replacing the traditional high street banks that retreated from the sector,” he says. “This new lineage of specialist and challenger lenders has helped transform the landscape of short term lending. They have injected versatility, speed, technology and a much needed reduction in interest rates. In turn this has attracted a new genre of client, refurbishment is now one of the most popular uses of short term finance. Property developers and investors are utilising the cheap funds on offer to purchase then renovate investment properties.”