The bridging finance sector faces some impending challenges, and broker specialist Finbri has shed light on potential issues.
Rising interest rates, which tend to impact higher-risk financing like bridging loans, are a notable concern. As rates rise, borrowers may find it trickier to secure the necessary funds and execute their exit strategies, particularly when refinancing is the plan.
Property valuations on a downward trend and government support for borrowers further complicate matters. A recent agreement involving Chancellor Jeremy Hunt and mortgage lenders grants struggling borrowers a 12-month grace period before repossession. While this is undoubtedly a lifeline for borrowers, it presents a challenge for bridging lenders, as their capital may become tied up in potentially long-term non-performing loans—a scenario that doesn't align with their typical short-term lending model.
Despite these challenges, there are some positive takeaways. Finbri's survey reveals that 64% of bridging loans are sourced through brokers. Borrowers choose brokers for reasons like the expert advice, access to the best terms and rates, speed, and the brokers' deep understanding of their needs. Those opting for direct lenders do so based on recommendations, application speed, direct communication, and the avoidance of broker fees.
Finbri emphasises that in an ever-changing market with new lenders entering and exiting, coupled with evolving lending criteria, a skilled broker can make a significant difference in securing bridging finance, especially when time is of the essence and the deal isn't straightforward.
Additionally, macroeconomic conditions are driving interest in bridging loans on peer-to-peer lending platforms. Developers, facing the challenges of a high-inflation environment, require more funds to complete their projects, creating opportunities for bridging lenders.
In conclusion, while challenges in the bridging finance sector are on the horizon, brokers can play a pivotal role in helping borrowers navigate these hurdles. The expertise, speed, and tailored solutions they provide can make all the difference in securing bridging finance successfully. Despite the challenges, there are opportunities for growth and adaptation in this ever-evolving landscape.
Source: Peer2Peer Finance News