COVID-19 has forever changed the bridging industry
By Paresh Raja -
In times of economic crisis, I’ve learnt that there are always opportunities for innovation, growth, and progress if one retains with the right mindset throughout.
One could argue that such creative thinking led to the rise of the bridging loan industry in the aftermath of the 2007/2008 credit crunch. With traditional lenders withdrawing from the market or implementing overly laborious application review processes to minimise their risk, a new breed of lender emerged which offered creative, fast financing solutions for those in need.
COVID-19 represents another, albeit fundamentally different, crisis to adapt to. With the bridging sector now accumulatively worth over an impressive £4 billion, the number of lenders present in the market was growing at a substantial rate before the virus hit. Now, with the property industry still recovering from the initial effects of the coronavirus pandemic, I believe the bridging market has reached a critical crossroads in its evolution.
Filling the void
Overall, established bridging lenders have played a vital role supporting property transactions throughout the lockdown. With mortgage providers and big banks retreating from the market to minimise their risk exposure, bridging lenders effectively stepped up to support those in the middle of a property transaction.
The core offering of specialist finance firms is that they take an objective view of each applicant and deliver a loan that is individually tailored to their circumstances. There is no one-size-fits-all method employed like there are at traditional firms (rental stress tests, salary projection repayment alignment, etc) so when an application is successful – the funds can be deployed with remarkable speed.
At Market Financial Solutions, we have deployed upwards of £27 million in loans since lockdown began – one of which helped a client in Northern Italy complete on a property transaction in South London, a case you can read about here.
The bridging sector’s ability to help facilitate such transactions, even at the height of lockdown, will likely not be forgotten about in the near future. This illustration of the value that the bridging industry provides will, in my opinion, lead to a growing demand for bridging services over the coming months as the UK property industry enters into a post-COVID period of renewal.
Here to stay
The primary reason lenders like MFS have been able to continue their operations is that they’ve focused their efforts on improving their broker-client relationships for many years.
As mentioned previously, the number of lenders entering the market had been growing exponentially in recent years, and as a result the industry had become increasingly competitive.
I believe that COVID-19 will lead to some consolidation of this market, as lenders who’ve survived previous periods of economic turbulence will be separated from the somewhat inexperienced firms who haven’t.
Those who are able to weather through the obstacles posed by COVID-19 will be able to enjoy the new appreciation of their sector’s services. It may even be the case that a second spike in cases means alternative financing once again becomes the only option for those still wishing to complete on transactions during lockdown.
But even if we’re now firmly on the road out of the pandemic, there are good reasons for lenders, brokers and borrowers to be optimistic about the future. Those seeking bridging loans this year will be able to enjoy a market full of lenders who’ve used COVID-19 as an opportunity to refine their craft and improve upon the efficiency of their services. It’s safe to say that the novel coronavirus has proven that specialist finance, and definitely bridging loans, are here to stay.
Paresh Raja has an extensive background at one of the Big 4 consultancy firms, specialising in structured finance, and a long-standing career in the commercial and specialist lending sector. He is therefore well placed to discuss anything bridging finance specific, or business more generally. Paresh is now the CEO at Market Financial Solutions which he has developed to become a leading name in the bridging finance space.