Bridging lenders excited about future lending prospects

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Bridging lenders and their intermediaries are feeling positive, following the easing of recent restrictions due to covid-19

The specialist finance industry has been hit hard in recent
weeks and bridging lenders have had to halt any new business during the
coronavirus lockdown. With over 50 bridging lenders and hundreds of
intermediaries, the industry has seen very slow growth with hundreds of staff
been put on furlough and a limited funding due to no construction work, surveys
or auctions taking place.

However, with restrictions easing, the thousands of
households and property developers that use bridging finance each year will be
able to start purchasing properties and getting their businesses back on track.

“It has been a testing time for the bridging industry,”
explains Dan Kettle of Octagon Capital. “Our products
are often used as a quick way to buy properties and avoid mortgage chains, but
the lockdown has meant that almost all deals were put on hold and we could not
acquire any new business.”

“However, with restrictions easing, we are in a good
position to resume funding again. Many people and investors will be excited to
start building and buying property again and with mortgage lending even tighter
than before, we could see positive growth and a good Q4.”

During the 10-week lockdown period, bridging providers were
on tenterhooks over whether
they could offer mortgage holidays to their customers and what the
terms would be surrounding their agreements. Bridging finance is often used for
a maximum of 24 months, but with so many construction jobs halted, the chance
of these running their course could lead to the deals expiring and challenges
for customers in terms of repossession or refinancing.

Nicholas Wallwork of the Property Forum explained: “The vast
majority of building sites have come to a standstill. As a consequence, those
working against tight bridging loan finance repayment dates will struggle. The
property/project, if work does not restart very soon, would likely be worth
nowhere near their target value. As a consequence, they would not be able to
raise as much traditional finance as expected which would usually be used to
pay off the bridging loan. Indeed, when you also factor in the potential
reduction in property prices on the whole there could be a huge shortfall.”

However, with restrictions easing and the Prime Minister
looking to open all non-essential retail by 15^th June, there is more
confidence in the specialist finance and bridging industry and many will be
delighted to hear this news.

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