The top bridging trends over the past year—and what's in store for 2022

For the final virtual roundtable of 2021, Bridging & Commercial partnered with specialist lender Together to take a look back at what defined the last year and what may lie ahead for the sector in the coming months.

The live event, held on 18th November, saw Together’s intermediary sales manager for the South, Tanya Elmaz, and specialist key account manager, Lorenzo Satchell, joined by packagers Racheal Harkins, head of bridging and commercial loans at Time Finance and Alison Houghton-Corfield, national relationship manager at Master Private Finance. The session was moderated by Caron Schreuder, Medianett’s managing director. 

When the panel was asked to identify the top trends over the past 12 months, Racheal highlighted a something which had a huge impact: the stamp duty tax holiday. “Banks were stuck and people saw bridging as an alternative.”

“It propped up the property market and massively took us through 2021,” agreed Tanya, adding that it showed the importance of the sector and the government’s willingness to ensure its survival. 

The somewhat shocking levels of business that arose because of this initiative meant that delays were felt across the board, specifically when it came to legals. “It caused a backlog everywhere; the solicitors we were working with put in extra hours . . . I sympathised with them; they had the same pressures we did,” Racheal stated. 

Holiday lets was also a trend over the past year, which Tanya said arose from landlords and investors wanting to obtain higher yields from their portfolios, and was further supported by travel restrictions. “We’ve managed to fall back in love with the UK.”

Racheal pointed to the skyrocketing pricing of Airbnb’s and guesthouses as proof that people are starting to see the value and income potential of these investments. 

Building on the topic of landlords evolving their types of investment in search of further yields, Lorenzo is seeing ongoing interest in HMOs, particularly in and around university towns. 

“[There has been] a resurgence of the rental market,” he commented.

“Landlords are either looking to extend, purchase in new markets such as holiday lets or HMOs . . . or refurb to generate more income.”  

Alison remarked that demand from young professionals wanting to live in a more social set-up, such as an HMO, for a decent price and with good amenities, is growing. This, coupled with what remains a difficult first-time buyer market, means that this asset class looks set for success in 2022. 

The demise of the high street has revealed semi-commercial opportunities, too, which provide the surety of residential against the commercial risk involved. Similarly, disused office space is being acquired by developers looking to convert it into residential by taking advantage of the relaxed permitted development rules. 

Elsewhere, the well documented desire for more space led to many seeking properties outside of city centres. Alison reported a notable surge in regulated bridging to fund opportunities where prospective buyers battled it out to be the first to secure their next home.

“If you were relying on a mortgage, often you’d get taken out of the equation,” she explained. 

This was the year of the property auction, too, for which bridging is perfectly suited. As auction houses moved online, people who would not typically explore acquiring property this way were suddenly becoming involved and in need of funding. 

It has undoubtedly been a defining period for relationships in the sector. Lorenzo emphasised that competition—in terms of rate and innovation—has never been stronger. 

He feels that the need for education to flow from lender to broker and from broker to introducer is necessary to provide a “360-degree package” to ensure best client outcomes. 

Racheal confirmed that Time Finance took the opportunity during restricted business periods to review its lender panel and processes with a view to improve the customer journey—underpinned by robust compliance measures at every turn. A training programme for new starters was devised and lenders began to come in to provide on-the-job experience.

“People learn better by doing.” 

“This year has been super special for the relationships we have nurtured with our partners,” Tanya commented. “We’ve all gone through something together.” 

Having open dialogue and feedback mechanisms is a priority for the lender. For example, during 2021, broker engagement has led to more streamlined processes, a wider AVM criteria and expanding online verification for income. 

“Lenders have really taken feedback on board, and we have seen a lot of it come into action,” Racheal shares. “With some lenders, prior to the pandemic, it would fall on deaf ears.”

In terms of expectations for 2022, Alison would like for more industry players to embrace technology. “We need to set our stall out for the new generation,” she urged.

Tanya agreed that businesses in our sector need to think “bigger”. While tech advancements were hitherto often a slow burning project, this has all changed. “Customers expect more, and brokers and distributors do, too—lenders have to deliver.”

In response to a question about the concept of automation in what is still a specialist, bespoke product area, Lorenzo said: “Process and lending decisions [are distinct] and should remain separate—it’s the process that should continue to improve [through technology].” 

He predicts that property development will continue to be busy in over the next year. Following the difficulties presented by materials shortages and cost hikes, leading to many holding off or landbanking, plenty of developers will resume projects in the coming months, possibly spurred on by the commercial-to-residential conversion trend. 

Fresh off the back of COP26, Racheal believes that we will see more attention on building greener.

“We’re going to see a lot of businesses wanting to transition into being green and maybe raise funds on a commercial property in order to do that. That’s probably going to be our biggest trend.”

The panel went on to discuss the lack of general support from the high street for non-standard properties and that specialist lending—and its hallmark flexibility¬—will once again come into its own. 

Tanya expects that businesses will continue to require finance in the form of cashflow injections as they continue to recover from pandemic-related losses. Picking up this thread, Racheal suggested that a product like a homeowner business loan might become popular as a cheaper alternative for those repaying CBILS liabilities. 

The full virtual roundtable can be watched below.

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