In a challenging economic climate, with high inflation, soaring mortgage rates and rental prices impacting consumers, property developers and the buy-to-let (BTL) market, the bridging market has managed to sustain its momentum and flourish.

The Association of Short-Term Lenders’ (ASTL) figures show that bridging completions passed £1.4bn in Q1 2023, a 11.8% increase on the previous quarter. This boom in bridging can be attributed to two key factors: the strong demand for short-term finance options to reach long-term goals in the difficult financial period we are in and the flexibility and convenience that bridging loans offer. 

Despite the worrying headlines, when it comes to home ownership and  BTL rentals, the underlying data shows that appetite is still there, admittedly at a lower level than it should be. This continued demand for quality properties is ensuring that short-term finance options, such as bridging loans, are increasingly sought after in the property market for everything from property purchases, refurbishments, and development projects. Borrowers recognise the opportunities they can unlock and the financial gaps they can bridge by making the most of the current climate by getting a bridging loan. Whether it’s seizing a lucrative property investment with house prices in a dip or starting a time-sensitive refurbishment project, bridging loans remain a reliable solution. 

Thriving on adaptability

The bridging market’s ability to thrive is closely linked to its adaptability and responsiveness to pricing updates and changes in interest rates, market demand, and risk profiles. Lenders who regularly update their pricing models demonstrate a commitment to maintaining competitive rates, which attracts borrowers and encourages market activity. 

By closely monitoring and promptly responding to changes in interest rates, the bridging market ensures that its financing options remain attractive and in line with market conditions. Additionally, staying attuned to shifts in market demand and risk profiles enables lenders to make informed decisions and offer tailored solutions to borrowers.  

Currently one of the largest impacts in the market is the pace of change of interest rates. Lenders need to be really nimble, repricing, and having a good understanding if the right pricing is achieved. The bridging market’s ability to adapt and respond to these changes, positions it as a dynamic sector within the financial landscape. 

Competing with confidence

Stabilised mortgage rates play a vital role in enhancing lender confidence within the bridging market. However, with the current market constantly in flux, lenders have become more cautious in the commercial bridging market, deeply analysing the long-term viability of portfolios and the risks that they carry.  

While rates continue to change, it’s important for lenders to ensure they know the customers well and understand the reason why a bridge is being taken and just as importantly how it is going to be repaid.  Lenders need well packaged information to enable good credit decisions to be made. 

When mortgage rates stabilise (which they will), lenders will be able to make more accurate risk assessments and pricing adjustments. This heightened confidence will enable lenders to refine their products, making them even more attractive to borrowers. 

Stabilised mortgage rates also serve as a benchmark for comparisons, allowing borrowers to make informed decisions when considering bridging loans. By having a stable reference point, borrowers can assess the competitiveness and affordability of bridging loan options.  

Future of the bridging market

The future of the bridging market appears promising. What remains key is banks’ speed to loan delivery; bridging loans are often sought when something is needed urgently so that’s why at Ashman we are built on technology that, when we launch, will help remove as many barriers and as much stress as possible for the broker and the end customer.  

It is important to remember that real people with real needs sit behind these loans, and they’re often needed in highly stressful and demanding situations. Keeping customers’ needs front of mind as interest rates continue to fluctuate is important for all lenders to find ways to streamline processes and provide a personal experience to support people when they most need it. That’s something I’m incredibly passionate about in my role at Ashman. 

I expect to see the bridging market to continue to grow, with speed, agility and personalisation becoming increasingly important factors that will set lenders apart, ensuring brokers and clients return to them.  

Caroline Luxmore is chief commercial officer of Ashman Bank