Bridging lenders ‘remain bullish’ for 2022 – Diamond

Speaking to Specialist Lending Solutions as part of the Get to Know Your British Specialist Lending Award Winner series, United Trust Bank’s bridging director Gavin Diamond (pictured) said despite the unknowns of 2022 most bridging lenders “remain bullish” about the year ahead.

He said bridging lenders had “always adapted” their offerings to “meet market opportunities and demand” and added that this would be the case in 2022.

Diamond said in 2020 the demand for developer exit loans had fallen away but would rebound in 2022 due to the impact of Covid-19 and Brexit on supply chains, increasing the time needed to complete projects and increasing cost of materials and labour.

Diamond said further bases rates “seem[ed] inevitable” and lenders would respond differently depending on their funding lines.

“The 2022 outlook for property values however remains positive which brings market confidence and a demand for funding. However, it may be a little trickier for lenders to assess the viability of proposed exit strategies,” he said.

He noted that with lending rates at all-time lows and broker commissions at all-time highs, lenders and brokers would “continue to innovate through improvements in process and technology advancements to differentiate themselves”.

He said the market had traditionally relied on manual assessments and underwriting and it would be “inevitable” for there to be further development of broker portals, automated valuation models, biometric ID and increased automated decisioning, especially for more vanilla transactions.

Learnings from 2021

Diamond said 2021 had been a “strong year” for the regulated and non-regulated bridging sectors with Association of Short-Term Lenders figures pegging the bridging market at £4bn.

He said this was on a par with levels in 2018 and 2019 after a drop-off in 2020 due to the pandemic.

Diamond said: “A highly liquid and competitive transactional market during 2021 was fueled by the various stamp duty holiday deadlines, with both homeowners and property investors making use of bridging loans to secure property purchases, often raising cash from lowly geared properties to facilitate transactions speedily or generate funds for new or ongoing projects.

“It’s been a highly competitive lending landscape with lowest ever rates being offered, gearing returning to pre-Covid levels and new lenders regularly entering the market.”

Diamond said one key takeaway for the year would be the additional time and increased costs of heavy refurbishment of conversion projects.

He explained “This is down to a combination of Covid and Brexit with materials often being in short supply and/or the costs of materials and labour being significantly higher than originally forecast. This is likely to continue into 2022 and beyond, which needs to be considered by investors, developers and lenders when assessing opportunities.”

Diamond said the lender had “grown the team significantly across all areas” over the past years to maintain service levels as business volumes grew.

He said: “We have exciting growth plans over the next few years which will require targeted investment in both staff and technology. Watch this space.”