Bridging loan market

The bridging market hit various records in quarter 2 of this year based on the most recent ASTL (Association of Short Term Lenders) figures:

  • A record £4.62bn loan book at the end of the quarter
  • An increase of 14% on the same quarter last year
  • Growth of 11.7% on the previous quarter
  • Application volumes up 9.7% over the year

During the quarter completions of £1bn took place and we as Snowball contributed to this figure as we have done in the last quarter too.

We continue to see new players entering this market and new products and services from both existing and new providers. There are a lot of providers all vying for the deals in the marketplace and this has seen the costs come down considerably due to competitive pressures.

One of our roles at Snowball is to ensure the players are credible, have enough liquidity and understand the deals put before them. There is an issue in the market at the moment that funders rush to get a ‘Decision in Principle’ out to the client or advisor within minutes of an application. Whilst we all like speed, we would prefer the response takes longer but is based on an understanding of the deal put before them, not just a quick scan of the headline numbers and get some headline terms out which turn out to be meaningless later down the road. I contributed to a recent article in the Bridging & Commercial magazine about this very aspect.

One aspect that does still amaze me though is how many deals I see where people have gone into bridging deals without a solid exit and strategy. The bridging market is a vital part of the property funding market, and provides the funding for deals that just would not get done on a traditional basis.

However due to the risk profile, it is still an expensive route to take and if you do not have a solid exit strategy, it can have a huge impact on any final returns of investment, once all the funding costs have been included. I have seen deals where an expected sale/refinance has not occurred at the expected time, and the increased costs have wiped out all the profit on the deal.







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