Speculative applications are dragging down bridging conversions – Jannels

However, applications for the quarter came in at £6.69bn, which is a considerably larger figure.

This means that for every £7 worth of bridging applications submitted during the quarter, there was less than £1 completed.

And this isn’t a trend that was unique to Q4 2020. Across, the whole of 2020 there were £25.82bn of applications, but only £2.88bn of completions.

Looking back further, it seems this low conversion rate has been exacerbated by the pandemic, but it was an emerging trend way before Covid.

In 2019, we recorded £23.19bn of application and £3.99bn of completions. And, in 2018, there were £21.46bn of applications and £4.05bn of completions.

So, what is the cause of this high rate of drop-off from bridging applications to completions? Does it matter? And, if so, is there anything that we can do to improve the situation?

Speaking to a number of parties within the industry both lenders and intermediaries, it seems the low application to completion conversion on bridging loans is from of a combination of brokers sending one application to multiple lenders to find at least one that sticks and also the increasing average length of time from application to completion.

And these two things are intrinsically linked.

Rising completion times, falling conversions

Bridging finance is a short-term loan and so the longer it takes to complete, the more likely it is the original requirement for the loan will no longer be necessary, so if we are seeing an increase in average completion times this will naturally lead to more loans falling through.

This increase in completion times is rarely caused by lenders dragging their feet – it more often sits with delays in accessing the correct information, valuations, conveyancing etc.

However, lender turnaround times are not helped if they are inundated by lots of speculative applications from brokers who are using the application process to shop around.

Thorough research is an important part of any advice process, but its more efficient for everyone involved if this takes place in advance of application.

The current situation, with so many applications falling by the wayside, does not help anyone – lenders, brokers and importantly customers.

So perhaps, as an industry, we should be looking to provide greater certainty of terms earlier on in the process.

Brokers have a duty to their customers to explore all of the available options and lenders do not want to be processing an unnecessary number of applications that don’t go on to complete.

If we can change ways of working and patterns of behaviour, we can improve the process and create a more efficient model.