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Bridging loans’ future is ‘digitalisation’ – Clayton

by: Rowan Clayton, product director at Finova
  • 18/06/2024
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Bridging loans’ future is ‘digitalisation’ – Clayton
If I had to make any predictions for the future of the mortgage sector, it would be to watch out for the continued rise of bridging loans.

In Q1 2023, UK lenders recorded a grand total of £278.8m in bridging loans, and all signs point towards that momentum carrying on into 2024 and beyond.

It’s no secret that a bridging loan is one of the most versatile products on the market. As a product, it is fully flexible and can be arranged in quick time, normally reaching completion within a swift two weeks (but sometimes even faster). But what’s less discussed is how bridging loans might be improved further, and the key is digitalisation.

While the bridging loan industry has always led on the frontlines of innovation, the recent industry-wide embrace of fintech solutions has introduced several decisive changes. Before Covid, many lenders were still lagging behind other industries, using manual processes or people to support their operations.

The modern and digital bridging loan process is now very different. From property risk data providers, to personalised pricing solutions and new market entrants, lenders now have much greater capacity to offer new and innovative products.

The future for bridging loans lies in this direction. Borrowers know what they like, and what they like is a seamless digital transaction.

If a person can purchase a weekly shop with little more than the tap of a debit card, then they will have similar expectations for a larger purchase. All the same compliance checks will remain in place, but the keyword is seamlessness.

 

Digital tools for bridging loans will be ‘essential’

As we saw during January, lenders are in heated competition for business in the current market, and bridging loans are not exempt. Inflation has dipped to 2.3%, and homeowners may now be in a position to finance a short-term loan.

Bridging is ideal when customers’ needs require speed; the product has a versatile range of applications, including covering an auction purchase or supporting renovation projects on rental properties. As such, borrowers will not only expect a reasonable price, but a quick turnaround.

In the coming months, digital tools will become an essential and not an optional add-on for those looking to service customers with this speed and fairness.

So, how do lenders deliver a more efficient process for their bridging loan customers? It begins with investment in faster, smarter and more flexible mortgage origination platforms.

Providing brokers and consumers with an application portal to support enquiries, alongside a fast-paced automated flow that ensures relevant data can be assessed to provide a quick response, is vital.

New pricing engines can draw upon rich data to adjust rates and fees based on real-time market activity, while also allowing business development teams to tailor deals based on each application where required.

Some systems even have an ‘always on’ pricing approach that reduces the impact of last-minute price changes on brokers, thereby safeguarding clients and their bridging loan applications. The ability to respond quickly and smoothly to change, while working closely with brokers, is paramount. It would also enable lenders to react to competitors’ rival offerings, whilst offering far greater flexibility in fees.

In the rush to win new customers, lenders must not underestimate the importance of digitalisation. Bridging loans are a good product, but in our industry, the difference between a good product and a great product is the ability to leverage digital technology.

The value of financial services is driven through speed, certainty, and flexibility, and these are three qualities that technology is more than equipped to help with. In the final analysis, the future is digitalisation, and we must not let bridging loans fall to the wayside.

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