How Bridging Finance Has Been Shaped in Recent Years and What Lies Ahead

The demand for bridging finance remains strong, with books that continued to grow to record levels in the second quarter of 2024, reaching almost £8.4bn, according to data released by the Bridging & Development Lenders Association.

 

What Makes Bridging Finance an Appealing Financial Tool?

 

This loan type is widely used in the UK and internationally to “bridge” various short-term financing gaps, making it an appealing option, especially to high-net-worth individuals (HNWIs) who require access to funds for time-sensitive transactions. 

Bridge loans are often used to address property chain breaks, enabling the purchase of a new property before selling another. They are also used to secure property at auctions, where short settlement periods apply. Bridge loans are also commonly used to fund property renovations before a sale, without having to commit to a lengthy mortgage process.

Unlike traditional mortgages, which can take a number of weeks to secure, a bridge loan can be approved in a matter of days. Additionally, bridge loans offer flexibility to be used across a variety of financial circumstances and across different jurisdictions. 

Read more about the benefits associated with bridging finance here. 

 

The Impact of Global Events, Developments and Trends on the Bridging Finance Landscape

 

In recent years, various factors have shaped the bridging finance sector, and the current economic climate and emerging trends continue to influence it. Below, we take a look at some of these influences.

COVID-19 pandemic 

The pandemic brought about disruptions across multiple sectors, including the short-term loan market. It ramped up the demand for flexible financial solutions, including bridging loans to close the gap for immediate funding needs. The pandemic also propelled the adoption of digital platforms, making loan applications more accessible. Lenders had to be innovative in their approach to risk assessment and management, pushing them to improve their processes and embrace new technologies.

Brexit 

Following Brexit, the UK has undergone changes in the financial services’ regulatory landscape aimed at fostering a more dynamic and competitive market. Lenders have had to stay abreast of new requirements and have had to adapt their practices and compliance frameworks accordingly. There is a strong emphasis on responsible lending and risk mitigation practices.   

Inflation rate changes 

Although they have subsequently declined, global inflation rates reached their highest level in 2022, since the 1990s. During periods of high inflation, property is often seen as a safe investment compared with other assets, driving up demand for real estate and as a result, for short-term financing solutions. 

This led to increased opportunities for lenders within the bridging finance domain. The need for rapid, flexible financing no doubt prompted lenders to create more innovative and competitive loan products to meet the changing needs of borrowers. 

Fintech advancements 

Technological developments have significantly impacted the bridging finance industry, as they have across most sectors, improving efficiency and the customer experience. With advancements in fintech, lenders have been equipped to streamline and speed up the loan application and approval process.

Other benefits associated with improved technology include bolstered security measures, greater transparency, and enhanced audit trails and fraud detection systems.

Drive towards sustainability 

In recent years, there has been a shift towards sustainability in the financial services domain, with emphasis being placed on taking environmental, social and governance (ESG) practices into account when making investment decisions.

Loan providers are therefore increasingly incorporating ESG criteria into short-term finance solutions and decision making. This shift includes focusing on funding green projects that boost energy efficiency and foster sustainability practices or that focus on community development. 

 

The Potential Future of Bridging Finance

 

Looking ahead, considering the positive changes that the industry has embraced in spite of challenges in the past, there is reason to believe that the bridging finance landscape could continue on a growth trajectory. 

Just over half of the respondents in a UK bridging market study believed that last year’s macroeconomic environment would have a positive impact on the UK bridging market, with lenders embracing opportunities to respond to market uncertainty.

Moreover, it is expected that the bridging market will reach £10.9 billion by the end of 2024 and will grow by 25% over the next five years, according to a London-based research firm.

We believe that technological advancements will continue playing a pivotal role in transforming the sector, especially as data-driven insights, machine learning and AI become more integrated in the risk assessment and loan approval processes, and in the enhancement of products and customer service.

Given the strong emphasis on ESG principles across industries, it’s likely that sustainable finance will continue to gain momentum in the bridging landscape as organisations and individuals begin to prioritise investments in environmentally and socially responsible projects.

And, as competition continues to grow in the bridging finance industry, lenders will undoubtedly keep focusing on enhancing the customer experience through the adoption of streamlined processes and improved service, with speed and efficiency a main driver of their efforts.

 

Not Sure Which Bridging Finance Lender to Approach?

 

At Global Bridging Finance, we help you secure the best loan available. We are experts in sourcing bridge loans and short-term finance that align with your individual circumstances.

We put in the work to connect you with the top players that will get the best deal for you on the market. And we do this all with speed so you can also move quickly on your financial transaction.

Get in touch today and speak to one of our expert brokers. We're here to help!

 

 

Disclaimer: We are specialists in international bridging loans but are not financial advisors. We encourage you to work directly with a qualified financial advisor for investment advice.