Experts predict growing activity in the Bridging Finance sector. But, is the market heading for a bumpy ride?

The Bridging & Development Lenders Association (BDLA) and Interpath’s latest survey shows a mixed bag of news for those in the bridging finance market. While optimism about future growth is high, some significant challenges threaten to dampen the party.

A Growing Market?

The good news is that 62% of surveyed brokers and lenders expect annual origination volumes to increase. This is fuelled by a strong expectation, shared by 92% of respondents, that institutional funding will remain available or even increase in the coming year.

Add to this the expectation of lower average monthly interest rates – a sentiment echoed by 62% of respondents – and the picture looks rosy.

The Good News – Money is Flowing

• More Loans: 62% of bridging finance brokers and lenders expect to see a big increase in loans taken out over the next year.
• Low Interest Rates: With 62% predicting a drop in interest rates, borrowing could become more appealing.
• Institutional Funding: Almost all respondents (92%) believe institutional funding will stay strong or even increase.

The Challenges – Brace Yourself For Rough Waters

• Slow Legal Process: Half of survey respondents reported that it’s taking longer than ever to complete a loan, with legal delays a big problem. This could slow down your deals and cost you money.
• Intense Competition: 60% of respondents said the biggest challenge is competition. With more players and money flooding the market, finding the right loan could become more difficult.
• Default Fears: Despite the optimistic outlook, 92% still fear that more borrowers might default on their loans.

The Numbers Don’t Lie

• Average Loan Size: Bridging loans are getting bigger, with the average loan jumping from £400,000 to over £600,000.
• Average Interest Rate: Most loans (51%) are being offered at rates between 1.00% and 1.25%, but some are reaching above 1.25%.
• Average Loan Term: The average loan term is 9-12 months, reflecting the short-term nature of bridging finance.
• Popular Uses: Refurbishment projects are the most common reason for bridging loans, while downsizing is the least.

BDLA Chief Executive Officer Vic Jannels is optimistic: “There will be challenges, of course, but by maintaining high standards of transparency, professionalism and customer focus, we will be well placed to meet the growing demand from both customers and institutional funders.”