There is no doubt 2022 brought a lot of change and subsequent challenges, with the ongoing aftermath of Covid-19 and Brexit, record-high inflation, and the crisis in Ukraine, just to name a few.
While there were plenty of hurdles to overcome in 2022, the bridging finance market has shown steady growth throughout the year, which is brilliant. Moving forward, we see no sign of this slowing down.
The impact the wider economy has on the bridging loan industry is huge. The cost of living crisis and rise in inflation rates has left a massive imprint on the property market, with many investors going to bridging finance as the recession looms over the economy. Therefore, the importance of bridging lenders providing affordable options has never been so important.
Innovation, flexibility and speed will continue to be key in the bridging market this year to ensure brokers and their clients can take advantage of market conditions and secure investment opportunities in a tight timeframe.
Fixed rates will grow in popularity
Security will also play a crucial role. Owing to the current economic climate, many borrowers are demanding the comfort that their loan rates are fixed for the term of their loan.
There are many reasons for this: 1) Protection: borrowing at a fixed rate means one less thing to worry about and profit margins can be protected. 2) Budgeting: once a borrower has locked a rate in, they will know how much needs to be repaid over the course of their term and even if interest rates suddenly spike, their repayments remain the same. 3) Capitalisation on low interest rates: with it looking like interest rates are only going to continue to rise throughout 2023, taking out a loan at the time when they are lower, means the borrower will be able to lock in a cheaper rate for a period of time, which could reduce the overall cost of their loan.
Taking the above into consideration, it is clear why borrowers have and will continue to look for lenders who can provide fixed rates in 2023.
It appears we are in for a rocky road ahead, however there is always an opportunity to overcome any challenges presented. This is why last year we introduced our fixed rate scheme, the Hope Guarantee, which provides broker’s clients with much needed security.
This involves borrower’s rates being fixed for the term of their loan, as soon as Hope Capital’s solicitors have been instructed providing there are no material changes to the application or loan, regardless of increases in the Bank of England base rate.
In addition, we will also continue to regularly review the market to ensure we are delivering solutions to meet brokers and borrowers’needs, while standing out in this ferocious market.
Raising bridging awareness crucial
Furthermore, another element which will remain key in 2023 is the importance of raising awareness of what bridging loans can offer.
Although the specialist lending industry is notably increasing in popularity with brokers, there are still a few myths about bridging finance lingering, e.g. bridging is an expensive option and should therefore be seen as a last resort or this type of loan is only suitable for residential property purchases.
The reality is that bridging finance is far more affordable than you think and can be used for a range of opportunities which require immediate funding, including commercial properties, semi-commercial schemes, land deals, etc.
Not only does bridging finance enable borrowers to access finance rapidly, it also has many other advantages including customised solutions, because each loan is evaluated on its individual merits, i.e. a personalised solution can be found.
In addition, bridging loans also provide flexibility, as most bridging lenders are not bound by the restrictive loan conditions other traditional finance options are tied to.
Nevertheless, the misconceptions surrounding bridging loans are at times responsible for putting brokers off which is why it will continue to be important for education and awareness to be generated around short-term loans in 2023.
Reflecting on 2022, of course there were challenges to overcome and a great amount of uncertainty, but by no means was it a disastrous year for the bridging finance industry. In fact, a level of opportunity was created to meet the new demands and needs of investors and developers looking for fast and accessible finance solutions in certain areas.
Looking ahead, we feel very confident that the bridging market will continue to boom. That said, there is undoubtedly a lot to come in 2023 and it is therefore the responsibility of lenders to listen to the market, deliver competitive finance products and be at the forefront of raising awareness of the benefits the short-term lending industry can provide.
Jonathan Sealey, CEO at Hope Capital
Read More: ‘Bridging market will continue to boom’ – Sealey