Nick Jones, West One

Bridging rates are set to rise, but opportunities abound




If you regularly follow the mainstream mortgage trade press, product rate rises are dominating the headlines at the moment. However, that has not been the case in the bridging sector — quite the opposite, in fact.

According to the latest Bridging Trends update, bridging rates hit a record-low of 0.71% a month in the first quarter of the year, down from 0.77% in Q4 2021.

There are a number of reasons why that is the case, but perhaps the most important is the intense competition between lenders. I met with a firm the other day that claimed to have more than 190 finance providers on its sourcing system. That is an enormous number for a market that lent around £4.3bn between Q2 2021 and Q1 2022.

Not only does the bridging market have a large number of lenders, which increases competition, it is also incredibly diverse when it comes to funding sources.

Mainstream non-bank lenders tend to operate the same model: secure a funding line and warehouse facility from an asset manager, lend the money, securitise and then replenish the facility. While many of the larger bridging finance providers operate in a similar way, there are some firms out there using P2P models or private money, which helps sustain lending levels when conditions in the wholesale market deteriorate.

In addition, some bridging lenders may have non-utilisation costs, which mean that ultimately, they get charged for funding they decide to sit on. Therefore, it makes sense to lend that money, even at a lower rate.

It is this combination of factors that is currently sustaining lending levels and keeping rates low — however, I do feel that the current situation cannot last indefinitely.


Lenders are suffering from squeezed margins following the Bank of England’s decision to hike rates six consecutive times since 2020. We have a situation where bridging rates are falling, but funding prices are rising, leaving lenders to shoulder the added cost at a time when margins are already wafer-thin.

Clearly, that is unsustainable long-term and therefore, it is likely we will see bridging rates rise in the coming months in the same way they have in the mainstream market.

The obvious question is what effect this will have on demand, and in that regard, I am very optimistic. Regardless of what happens to rates, demand for finance will remain high in the bridging space — particularly for commercial and development funding, which I predict will be the biggest growth areas over the next few years.

UK cities are going through a once-in-a-generation reinvention, with people viewing them and using them in a different way to how they once did. With the high-street struggling, planners and councils are trying new ways to pull people into city centres.

As a result, we are seeing an explosion in the number of once-commercial premises being repurposed as residential developments, community hubs or other innovative new use types, which lends itself enormously to the bridging sector. The government’s levelling-up agenda and its drive to make the nation’s housing stock more energy efficient will also throw up huge new opportunities for the market.

So, while it’s quite easy to see the negative side of impending product rate rises, it’s important we also see the enormous opportunities available to our sector.

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