There’s a reason why bridging finance is a specialist market.
You may have approached your high street bank of choice for short term support in the past, only to end up facing a relatively slow process.
We all know how complicated the property investment world is. Sometimes, things go wrong, or plans have to change. A bit of flexibility during times like these would go a long way.
But, trying to find adaptable solutions or funding with mainstream lenders can be a challenge. Especially during uncertain economic periods. Why is this so?
In this blog, we’ll explore why high street banks and lenders appear reluctant to share public, and easily accessible information on their specialist financial products.
Banks may offer bridging products, but they’ll be hard to find
High street banks have been known to offer bridging loans in the past, and some still do.
Many mainstream names offer specialist products at the moment, according to bridging loan directory. But trying to find information on these loans could prove tricky.
Many of these lenders appear hesitant to promote what they offer. This is generally because banks who do provide specialist lending tend to only do so at the commercial and private banking level. The average property investor browsing for options may struggle to find information.
If you were to scour their websites, you’ll likely find endless details on ISAs, mortgages, and business accounts. But trying to find information on any bridging products may prove futile. To get any basic details, let alone make a claim, you may need to go through a broker. Existing customers of these banks may be able to make a direct request, but they’ll likely have to jump through some hoops to do so.
So why is it so hard to find mainstream bridging finance? While the answer is multi-faceted, risk likely plays the biggest part here. Bridging products, for lenders, can be risky. They’re short-term nature can make century old banks nervous. They’ve been known to pull bridging products in the immediate aftermath of a financial crises.
There’s also a lot of external variables that can affect how successful a bridging loan is. As they’re used for property investment, they’re swayed by chains in the buying process, market sentiment, buyers pulling out, and many other factors. Bridging is dependent on multiple elements coming together – in a relatively short space of time.
Mainstream lenders may have the motivation and resources available to stomach this risk during good times. But when an economy suffers, it makes sense to roll back on riskier products, or lending entirely. We’ve seen how quickly these shifts can happen in the past.
In 2007, at the start of the credit crunch, total gross mortgage lending in the UK reached just over £370bn. In 2009, this plummeted to £147bn. We only started to reach pre-08 mortgage lending levels again last year.
Also, while mortgage lending consistently rose in the years after the financial crisis, there was one single year that saw another big plunge. Between 2019 and 2020, the total value dropped by around £26bn as the global pandemic wreaked havoc.
We’re seeing similar results now. Mortgage deals have been pulled from the market in recent months, due to interest rate uncertainty and a cost-of-living crisis. Also, where mortgages can be found, the criteria involved is likely to be very strict.
But where banks struggle, specialist lenders can step up to support the market.
Specialist finance will become increasingly important
Specialist bridging lenders are designed and structured with these complications in mind. At MFS, we were lending throughout the credit crunch, supporting buyers who suddenly couldn’t find financial support elsewhere.
The specialist finance market embraces the kind of flexibility large players shy away from.
We can move quickly and adapt where things go wrong, which is common during times like these. In fact, mainstream lenders can sync up with bridging specialists to find solutions for these challenging periods.
Banks and large investment firms can provide funding to specialist companies to issue onto clients they themselves cannot work with. By utilising our expertise, they can still support property investors, even though they can’t handle the cases directly.
Over the last few years alone, we have received support from multiple funding lines. We’re well on track to hitting our £1.2bn loan book target and we will be putting this funding to good use by supporting your investment plans through this uncertain period.
Also, no matter how dire the news may get, we’ll remain transparent. We won’t shy away from difficulty. All our products, from auction bridging loans to buy-to-let mortgages, can be found on our website. Their terms, rates, and other details are updated in real time.
What’s more, brokers, and borrowers we work with will all have a dedicated underwriter. You’ll always have someone there to provide clarity. You won’t be left in the dark about next steps, or have to deal with a faceless switchboard.
There’s still a lot of uncertainty on the horizon. Raised rates, while we are also battling with a rising cost of living and inflation. Mainstream banks will likely stick with the plainest of products, and work with the safest of customers. But where you may not get very far on the high street, we’ll be there to keep your property investment plans afloat.