The future of bridging in supporting property investors
Paresh Raja is chief executive at MFS
The UK’s bridging lending sector flourished in the aftermath of the 2008 recession, as banks became extremely hesitant to lend to a variety of investors, business owners and property developers. By enabling property investors to access swift, efficient and tailored finance secured against the value of existing properties, the bridging sector served as a vital catalyst for the market in challenging times.
Reflective of the sector’s increasing importance to the broader property market, in the space of just five years between 2011 and 2016, the bridging lending sector is estimated by the ASTL to have grown from £750 million to £4 billion. This year alone, the organisation has recorded 123% year-on-year rise in bridging applications, with the amount of loans written now 11.4% higher. Given the ability of the sector to offer tailored and swift finance, bridging has supported a broad range of property investments inclusive of new buy-to-let, refurbishment, auction, and probate opportunities.
Last week, major buy to let lenders Santander, Principality BS and Platform, a subsidiary of The Co-operative Bank — stopped accepting mortgage applications from landlords with four or more residential properties as a result of new lending rules being introduced by the Bank of England’s Prudential Regulation Authority (PRA). Meanwhile, other banks have enforced or are considering new requirements taking into account the age of a property portfolio, with some even demanding landlords report an annual salary or put forward a business plan to access the finance they need to act on their investment plans.
In this environment, the bridging lending sector is ideally positioned to support buy-to-let investors and, in doing so, alleviate rising market demand for rental housing across the country. Our sector has historically succeeded where competing forms of property finance have failed and we must remember this as the market continues to evolve.