January has been the busiest ever start to the year for Hope Capital in terms of both enquiries and loan drawdowns. If the same has been the case across the bridging market, then 2020 is looking likely to be a very good year.
While the start of the year is usually a time where many lenders lower rates, a lot of lenders reduced before Christmas this time, with just a small number reducing rates in January. It is part of an ongoing trend where bridging rates are moving slowly lower. The positive is that this increasingly makes bridging an option that it wasn’t in the past both for brokers and their clients. This is also highly likely to be contributing to the increase in demand for bridging loans and a move towards bridging being a first-choice financial solution.
Some brokers are clearly looking at this market in a new light: in a recent NACFB survey 77% of brokers said that they introduced more deals in 2019 than in the year before, while 75% said that their average loan size in 2019 was bigger than in 2018.
There is also clearly a boost in confidence from investors, developers and from home movers. The stability of a majority in parliament and a definitive decision about Brexit is clearly having an effect already. While trade agreements are yet to materialise, there still appears to be an increase in confidence and signs that the property market is on the up.
Resumed talks of the Northern Powerhouse are having an effect too. While the Tories do now have to fulfil their election promises, even the talk of more investment buoys confidence among property investors. Consequently, there is a strong possibility that property prices in the north will rise. With that expectation we expect to see more investors looking at buying property now to take advantage of the bounce. This could well accelerate if HS2 is then given the signal to proceed.
All in all, it is a positive start to the year for bridging. The reputation of the industry is largely improving while rates fall ever lower. Service standards remain strong at many lenders, although it does pay for brokers to be discerning and not just go for the cheapest rate. Service, certainty of funding and certainty of decision – knowing that yes really does mean yes – can make or break a brokers’ relationships with their clients.
As these service factors are increasingly differentiators between lenders, there is an increasing requirement on brokers to understand the difference between lenders and their offerings. Brokers need to know which lender is best suited to their clients’ needs, as well as which are most likely to deliver on their promises. Research to get the right lender at the start of the process can save time and potential disappointment later on. If bridging is not something a broker does every day, it is worth chatting with a high-quality packager who can help.
There is still a long way to go on the country’s Brexit and political journey this year, and the ongoing trade negotiations will inevitably bring ups and downs. However, with the positive start to the year, taking the time to understand which lenders will serve your clients best, while contacting clients and nurturing the latent need for bridging, is likely to provide a firm footing for the months still to come.