In this respect, time is of the essence. This stream of specialist financing is therefore typically used to fulfil a company or individual’s short-term capital needs.
Historically, the bridging lenders we represent have had a steady flow of repeat business, both from brokers and serial investors alike, and they seek to complete shrewd investments where the time to find traditional lending solutions does not exist – despite favourable rates and lower fees.
More recently, we’ve seen the bridging market operate at an unprecedented pace, as opportunistic investors look to take advantage of the hot property market, spurred on by the perfect storm caused by the pandemic.
House prices continue an upward trajectory, and the imbalance between supply and demand has left home sellers quid’s-in, while homebuyers scrape the barrels of the remaining stock.
For every hot property to enter the market, there will no doubt be a number of investors competing with your average homebuyer to secure a slice of the property-boom-pie.
At no other moment is this more prevalent than when the gavel slams down, and the sale has been agreed. The lucky winners turn to bridging finance to make sure they can close the deal within the tight timescales stipulated in auction contracts.
In such market conditions, our clients have had to raise their competitive game. Key areas to compete on have been the speed of financing, attractive rates, and diversity of products.
Over the past 18 months, we’ve witnessed bridging lenders work tirelessly to ensure the delivery of funds reach borrowers as soon as possible, often within days of receiving an application to underwrite. Whereas funds would normally take the best part of six to eight weeks to drawdown on with high street banks.
This has laid the groundwork for the seismic post-pandemic shift in appetite for fast money. One must only engage in light social media searches to see the steady and impressive roll-out of innovative new products on the market, in a bid to attract more customers.
Only recently, Kuflink Bridging announced the launch of a lending product targeting commercial buy-to-let opportunities. Meanwhile, they are considering entering into the consumer lending market later this year too.
Since bridging finance is largely unregulated, bridging lenders have had to strike a balance between charging profitable, yet competitive rates. Historically, bridging lenders have had the freedom to set their own interest rates, which has often made them the least financially attractive option.
However, resilient demand for properties has made sure that bridging finance remains an absolute necessity for investors to utilise.
Often, bridging lenders will rely on lines of funding, from high street banks or high net worth individuals. Meaning, recent forecasts of an increase in the Bank of England’s base rate, will likely increase bridging lender’s cost of borrowing. This means that a knock-on effect to borrowers is surely on the cards too.
The dynamics at play in the current market presents opportunities for both borrowers and investors, as well as bridging lenders. For the borrowers, the market landscape is forcing bridging companies to stay competitive, with customer service remaining at the forefront of their efforts.
Equally, the opportunities for bridging lenders are boundless, as the lending market has been met with strong demand following the influx of investment in the post-pandemic world.
How lawyers can support the market
We are being instructed on multiple transactions each day across the board of our lending client panel, often with extremely tight deadlines to achieve successful completions for the borrowers and our lending clients so they can maintain their competitive edge in terms of speed and commerciality are emanated by us too.