Those operating in the mortgage and specialist finance industry have felt the squeeze in recent weeks and many bridging lenders have had to turn down any new business during the coronavirus lockdown.
With over 50 bridging lenders and hundreds of intermediaries, the industry has seen very slow growth with hundreds of staff put on furlough and limited funding due to no construction work, surveys or auctions taking place.
However, with restrictions easing, the thousands of households and property developers that use bridging finance each year will start to purchase properties again and getting their businesses back on track.
Bridging finance is often seen as an alternative to traditional mortgages, allowing those to avoid traditional property chains and access funds in a matter of weeks, rather than months.
“It has been a testing time for the bridging industry,” explains Dan Kettle of Octagon Capital, a bridging loans broker based in Moorgate.
“Our products are often used as a quick way to buy properties and avoid mortgage chains, but the lockdown has meant that almost all deals were put on hold and we could not acquire any new business.”
“However, with restrictions easing, we are in a good position to resume funding again. Many people and investors will be excited to start building and buying property again and with mortgage lending even tighter than before, we could see positive growth and a good Q4.”
During the 10-week lockdown period, bridging providers were in suspense over whether they could offer mortgage holidays to their customers and what the terms they could offer to customers.
Bridging finance is often used for a maximum of 24 months, but with so many construction jobs halted, this increased the chance of deals expiring and challenges for customers in terms of repossession or refinancing.
Nicholas Wallwork of the Property Forum explained: “The vast majority of building sites have come to a standstill. As a consequence, those working against tight bridging loan finance repayment dates will struggle. The property/project, if work does not restart very soon, would likely be worth nowhere near their target value. As a consequence, they would not be able to raise as much traditional finance as expected which would usually be used to pay off the bridging loan. Indeed, when you also factor in the potential reduction in property prices on the whole there could be a huge shortfall.”
However, with restrictions easing and the Prime Minister looking to open all non-essential retail by 15 June, there is more confidence in the specialist finance and bridging industry and many will be delighted to hear this news.