Bridging Introducer – Sept 2022

Donna Wells, Director at Envelop

As we head into the latter part of 2022, a variety of specialist lenders are commanding a growing level of interest from intermediaries who are looking to service the shifting needs of their clients. A trend which will gather further momentum moving forward, especially in the specialist residential marketplace as more potential homeowners are likely to fall outside of the traditional mortgage selection criteria.

This was evident in a recent study from Together which suggested that specialist residential mortgage lending is set to rise from £5bn to £16bn by 2030, driven largely by long term shifts in working and living patterns.

Specialist residential lending

The study, carried out in partnership with economist Dr John Glen, also predicted that the overall UK residential mortgage market will expand by 56% over the next eight years and, that of this rise, as many as 500,000 mortgage applications will be dependent on specialist lenders – doubling their market share to 4% of the overall UK mortgage market.

Whilst I am not privy to how this information was collated or calculated, it’s difficult to disagree with the sentiments behind the findings or the quote which supported them. As a business, we are certainly seeing more brokers coming to us with a range of highly complex residential cases and seeking additional support in sourcing alternate forms of finance to service the demands of credit-worthy borrowers who have fallen beyond tightening mainstream lending boundaries.

As such, the reliance on trusted packaging partners is likely to rise in line with this projected specialist lending growth. Meaning there’s no time like the present for intermediary firms to form an important specialist extension of their business to help service the growing complexity being experienced across the residential mortgage market.

Bridging finance

Bridging finance will continue to play an important role within this process and there is plenty of positivity emerging from the short-term lending market as bridging applications, completions and loan books all rebounding significantly on the first quarter of the year.

This is according to recent data from the Association of Short Term Lenders (ASTL) which showed that bridging completions were just over £1.2bn in Q2, an increase of 17.4% on the previous quarter. This means that completions have now been more than £1bn for five consecutive quarters. Within this, bridging applications were reported to have risen considerably to £7.5bn, an increase of 18.7% compared to the quarter ending March 2022, and the size of loan books has also risen, reaching a new high of just under £6.1bn.

In addition, the latest Bridging Trends report showed that contributors transacted a total of £178.4 million in bridging loans during Q2 – 22% more than in Q2 2021 (£146.5m), and up 14% on the previous quarter (£156.8m). Purchasing an investment property remained the most popular use of a bridging loan in Q2, at 24% of total contributor transactions, falling slightly from 26% in the previous quarter. The second most popular use was to chain break – accounting for 21% of total transactions.

These figures demonstrate the resilience, professionalism and maturity attached to short-term lending and this is an area which is becoming an increasingly attractive option for a variety of property-related transactions.

Commercial and sustainability

Another area of the specialist mortgage market generating plenty of attention in recent weeks and months is the commercial sector, especially when it comes to supporting firms in achieving their sustainability goals.

SMEs are reported to be heightening their focus on finding finance to boost their sustainability, with 65% of commercial mortgage brokers and 76% of asset finance brokers saying they have seen an increase in the number of ‘green loan’ enquiries.

Allica Bank’s quarterly broker survey showed that this trend is being driven by SMEs prioritising the upgrade of inefficient machinery, with 48% of commercial mortgage brokers and 72% of asset finance brokers saying their clients sought finance to help fund these projects. Behind this came buying electric vehicles (26% and 70%, respectively) and improving the green credentials of their existing premises (35%, 28%).

Serious challenges lay ahead for many business owners in light of rising energy costs and in the UK’s efforts to achieve net-zero. Improving energy efficiency has certainly jumped higher on many SME agendas and brokers can play an integral role in helping them access the right levels of funding to go greener and fund a number of sustainability projects now and in the future.