Although it makes sense that regulated bridging loans are in demand, it is highly unlikely that they are likely to exceed unregulated loans anytime soon.
MTF’s Bridging Trends data from the last quarter revealed that regulated bridging loans fell to the lowest level since 2015, coming in at 36.8% of lending in Q2, down from 43.7% in Q1.
There are several reasons the non-regulated bridging sector currently exceeds the regulated space: there are more lenders operating within that specific space, a wider asset class is accepted, and there’s a variety of products on offer.
What’s more, the non-regulated bridging market is entwined with the buy-to-let market.
Buy-to-let and bridging
The landscape for buy-to-let investors has changed dramatically over the years, with many affected by the political uncertainty from ongoing Brexit negotiations, combined with the barrage of tax and legislation changes from both the government and Bank of England.
Traditionally, bridging finance was used to bridge the gap between a property purchase and a delayed house sale.
However, over the years bridging lenders have adapted to new challenges facing property investors, each repricing their products and offering a distinct service and product proposition and as a result, there are more bespoke offerings for a variety of situations than ever before.
Bridging loans enable property investors to access funds quickly, providing an opportunity to expand their portfolio and purchase and convert properties for the rental market.
They can be used to work with a multitude of issues such as adverse credit, specialist mortgages for self-employed and those with unusual income structures alongside dealing with unusual properties.
Rise of regulated and second charge bridging
I do believe regulated bridging loans will continue to be in demand.
This will come from a combination of bridging rates being squeezed downwards, especially in the regulated space, making it more attractive to homeowners looking to take advantage of refurbishment loans on their own homes, and will be coupled with an increased awareness of bridging finance as a product.
Second charge bridge lending is also still looking strong as homeowners want to utilise equity in their property without disturbing the first charge debt.
As consumer confidence returns, and we see more owner-occupied purchases, we will likely see regulated bridging increase.
It will certainly be interesting to see what the next quarter’s results will be.