Gen X and millennials more open to bridging than over-55s – ASTL

According to Association of Short Term Lenders (ASTL) inaugural white paper on bridging, which surveyed 2,000 people, 67 per cent of respondents had heard of bridging, but most did not know how a short-term loan may be used.

Over a third (35 per cent) said they did not understand how bridging could be used and 23 per cent were unsure.

The report continued that 39 per cent did not know how long it would take to obtain funds, whilst 28 per cent thought it might take up to eight weeks and 31 per cent thought it could take two weeks. Timescales vary, with the ASTL noting that some deals could be turned around in days, whilst some could take up to four weeks.

Over half (54 per cent) do not know how the industry is regulated, with 27 per cent thinking that bridging loans were regulated by the Financial Conduct Authority.

Only 19 per cent said they were very or fairly likely to turn to bridging, with 61 per cent starting they were not likely to.

However, there is a generational difference as 34 per cent of those aged 18 to 24 said they would consider bridging, which compares to 15 per cent of the over-55s.

Bridging expense greatest concern for consumers

The report said that nearly half (47 per cent) of respondents thought bridging would be too expensive.

Around 54 per cent said they did not know what average annual bridging rates would be while 10 per cent felt annual rates could be upwards of 12 per cent.

It said that whilst bridging pricing was higher than standard property finance, there had seen a “considerable drop” in rates over the past few years, with typical annual rates sitting at nine per cent.

There is also a generational difference, as only 35 per cent of 18 to 24 years old and 36 per cent of 25 to 34 years old were concerned about the expense.

“However, uncertainty, around who to turn to, and integrally, who to trust rise further amongst these groups. With their formative years spent in the aftermath of the global financial crisis, it might be interesting to see whether it is a general mistrust of financial providers amongst younger generations,” the report noted.

There were also concerns around the exit, with 32 per cent worried about paying off the loan and 48 per cent scared about being able to sell their property in a chain-break scenario.

Only 12 per cent said they were worried about the “bad reputation” of bridging sector.

Few consider bridging for investment or financial support

Around 87 per cent of respondents said they were unlikely to run to bridging, secured against their property, to access capital for business investment or unforeseen financial pressures.

The report continued that 78 per cent said they would not consider bridging to buy an investment property, but this fell to 40 per cent amongst 18 to 24 years olds.

Some of the more popular reasons cited for bridging was access to quick funding in a competitive market, refurbishment purposes and auction finance.

The report said that bridging for auction finance could grow in use in the coming years as auctions were becoming more popular and accessible.

Less than quarter would go to broker for bridging

Around 36 per cent said they would not know where to start looking for a bridging loan, with only 21 per cent saying they would speak to a broker.

Around 26 per cent said they would ask their high street bank of building society.

The report said that this showed key areas where “greater education was required” as brokers were “best equipped” to fund the right solutions.

From a lender perspective, the most important factors was low interest rates at 17 per cent, followed by brand at 11 per cent and a recommendation from a broker at 11 per cent.

‘Presenting bridging in a better, brighter light’

Vic Jannels, chief executive of the ASTL, said that it was “heartening” to see that there was greater understanding and willingness to use bridging amongst younger generations but there was “clearly some important work to be done”.

He continued that the ASTL was looking to “present bridging finance in a better, brighter light” through relationship with mainstream and trade press.

Jannels said this meant showcasing the benefits of the trade body’s “mark of quality”, to show borrowers that being an ASTL member meant being “carefully selected” and “that they uphold high standards of integrity”.

He added that the report would also help signpost the sector to brokers who work in the short-term finance space.

“There are many great brokers working within the short-term finance market, with ever more looking to break in as this sector goes from strength to strength. What we need is for prospective borrowers to understand their value and mainstream brokers to know where to refer clients.”

Jannels concluded that the report had given a “well-rounded sense of our jumping off points” and he had “great confidence” that the industry could “build on these foundations, build greater awareness and consideration of bridging amongst customers in the future”.