Looking back at 2022: A tale of two markets – ASTL

If viewed purely through the lens of the mainstream term mortgage sector, the outlook grew increasingly bleak as the year progressed, whereas for short-term finance, the picture has remained much more positive.

The first quarter arguably started on the back foot, with Association of Short-Term Lender (ASTL) data showing that completions fell 15.8 per cent, from £1.24bn in Q4 2021, to £1.04bn. Applications dropped by just over 50 per cent, and the size of loan books fell from £5.08bn to £4.4bn quarter-on-quarter.

However, when you consider that Q4 2021 had hit record highs, and the Q1 2022 figures were still higher than the same time the year before, the wider image starts to come into focus. In fact, for the first time since records began, we saw completions above the £1bn mark over four consecutive quarters.

Moving on to Q2, any concerns about this drop back were dispelled, as applications, completions and loan books all rebounded, with completions reaching just over £1.2bn , applications rising 18.7 per cent quarter on quarter, and loan books even reaching a new high, at just under £6.1bn.

In all, a strong start to the year, demonstrating that the market is robust and sustainable.

This strength would certainly come into play as the year progressed, with global uncertainty taking its toll on the UK, showing itself in acute inflationary pressures, a rising cost of living, and most notably, a sudden shift from record low term mortgage rates in 2021, to soaring highs in 2022, spurred on by the Bank of England’s base rate rises. In turn, product availability took a dramatic hit, with Twenty7tec reporting a 51.6 per cent drop, year on year, in September.

Bridging market has ‘remained steady’

Through all of this however, the bridging market has remained steady. This is not to say that rates have not risen – this market is only insulated from, not immune to, the vagaries of the UK economy – but we have not seen the drastic rate shifts that have caused such concern in the wider mortgage market.

Most recently, the short-term market has continued to show strong growth. The ASTL data for Q3 2022 shows yet another quarter with completions again exceeding £1bn, an increase of 15.9 per cent on the previous quarter. Applications also increased, while loan books went on to hit another new high.

All of this is indicates that 2022 was yet another year in which bridging finance proved itself to be a steady and sustainable source of finance, even during uncertain times.

Stumbling blocks remain

However, before we pat ourselves on the back, we must remember that there are other complications for this market. This year has seen a continued struggle with extended legal timescales, as well as bottlenecks in terms of valuations. For a market that is founded on speed, and is generally priced higher due to its ability to provide fast access to address immediate needs, these can be considerable stumbling blocks.

Also, whilst we may not have faced the same uncertainty as the mainstream market, a drop in long-term product numbers, as well as increasingly strict criteria, and for buy-to-let investors in particular, restrictive stress testing and higher regulatory hoops, have ultimately affected those all-important exit routes.

Never has there been more call for short-term lenders and brokers to ensure that borrowers are well-prepared for every eventuality, and to maintain a strong code of ethics to ensure that this market remains as robust and sustainable as it has been over the past few tumultuous years.

At the ASTL, we continue to drive home our members commitment to a strong Code of Conduct, maintaining the solid standards that have so far made this market integral to the continued success of the UK property market, even in difficult times.