Nearly two thirds of bridging loan borrowers used a broker – and will do so again

Finbri polled 1,001 people who used bridging finance and found that the ones who went to a broker did so because of the advice and guidance provided. Others cited the ability to get a good deal, speed, efficiency and the broker’s understanding of their needs. 

Of those who went directly to a lender, they stated it was because they had been recommended or were under the impression that the application process would be faster. Others said they went direct so they could interact with the lender themselves while others wanted to avoid broker fees. 

Out of the people who used a broker to source their bridging loan, 95 per cent said they would go back to an adviser next time. 

Challenges in the bridging market 

It said although some bridging lenders had announced new funding lines and promotions on rates, their cost of capital would be impacted by the base rate increases.  

The firm also said bridging loans had a higher risk profile than other forms of lending, and every rate increase reduced the new loan a borrower was able to raise. Finbri said this could “jeopardise the borrower’s exit, especially when the exit strategy is to refinance”. 

Additionally, a drop in house prices could cause lenders to lower their loan to value (LTV) limits. 

Finbri also warned that the 12-month pause on repossessions could hinder people’s attempts to offload their properties at market value and leave bridging lenders with their capital tied up in “potentially long-term bad loans”. 

The broker said this was not ideal when their business model was based on short-term lending. 

“Some suggest it will simply kick the problem into the not-so-long grass. Add July 2024 to your calendar to wait and see,” Finbri said. 

The firm said a successful broker would navigate these challenges by keeping in constant contact with lenders, anticipating changes in lending and making sure applications are completed quickly. 

Finbri said: “Brokers are an invaluable source of help for borrowers seeking bridging finance. With a number of new lenders entering the market, whilst others are exiting, plus product changes and lending criteria in constant flux, a good broker can make all the difference to securing the borrower finance – especially where speed is critical and the deal is anything other than vanilla.  

“The better brokers will be in hot demand in the coming 12 months as borrowers find securing their bridging finance more challenging.”