It is often said that mortgage applications are becoming more complex than ever.

If this is the case then it stands to reason that the events of last year, with the furloughs, various income support schemes and other government interventions – along with a red-hot housing market with chain-breaks galore – have combined to make things even more complicated.

In such a lending environment it seems only natural that bridging would be moving into spaces that just a year ago a more ‘vanilla’ mortgage would have happily catered to.

And, as Mortgage Strategy found out when speaking to industry voices about this topic, the reasons for people wanting to borrow money may be changing too – necessitating the use of a flexible loan.

Glenhawk managing director Nick Hilton confirms that, year-on-year, the lender is seeing bridging become a more consumer-driven, hight street type product.

“With traditional high street lenders still not having the right risk appetite for bridging, we expect the specialist market to expand even further in 2021,” he says.

SPF Private Clients director of short-term finance Amadeus Wilson agrees. He says: “We have already seen bridging play a greater part for residential investors as well as its traditional market in 2020 and this trend will continue this year.”

As well as citing reasons such as people being more interested in home improvements than in moving houses, Wilson says: “There has also been an increase in interest in self-build from those with a large plot who want to build a house at the bottom of the garden.

“These are growing trends because many people have had their incomes impacted by Covid and are looking for ways to ensure it doesn’t happen again.

“A property that can be let out to generate an income is appealing, or a property that can be used by extended family members to live in – grandparents, grown-up children etc – in case we are locked down again. It can make sense to converge families and assets, while building annexes is also increasingly popular,” he explains.

Plunging rates are proving to attract more borrowers, too. Hilton puts this down to competitiveness in the space. Precise Mortgages group sales director Adrian Moloney says: “The entry of more lenders into the market has seen the historic pricing of bridging in some elements come down.”

Broadening funding options is another factor helping to make rates more palatable, Hilton says.

And Private Finance associate director Chris Sykes celebrates lenders “Becoming more and more flexible… allowing investors, especially, to take advantage of potentially large amount of finance to develop or refurbish properties.”

He also notes falling rates: “For the right client profile and deal profile for rates from around 0.30 per cent per month!”

Data from the Association of Short-Term Lenders shows that while bridging completions fell by 28 per cent to £2.9bn in 2020, applications were up 11 per cent alongside the total value of these applications rising 10 per cent, to £25.8bn.

The association says that applications surged in the second half of the year as the housing market reacted to government stimulus.

This, “reflects the enormous potential the bridging market has to provide customers with a funding solution through these difficult times,” says ASTL chief executive Vic Jannels.

However, among the positive outlook for bridging this year, everybody Mortgage Strategy spoke to was quick to spell out potential risks to borrowers. Moloney says its important that applicants entering into a bridge agreement “Does so with their eyes wide open.

“They need to know what they’re getting into and have a suitable exit strategy in place for when the loan term ends. This may include having a back-up plan, such as having funds to clear the loan or a term mortgage in place if they intend to let the property out.”

Moloney adds: “Applicants should always remember that some lenders charge default interest for going beyond the loan term.”

Hilton says that borrowers shouldn’t get sucked into headline rates and “half thought out promotions.”

And Wilson warns: “Building work never goes on time or on budget so be prepared for that eventuality.

“A year seems a long time to take a loan out for but it flies by so you need to think about your exit. Short-term finance is exactly that, so do your homework or have a broker do it for you,” he concludes.