The lending scene in 2023 and what bridging trends could be on their way in 2024?

Property investors faced a mixed year in 2023. It brought with it many challenges. But, despite rampant pessimism, 2023 was also a year of recovery.

After several months of skyrocketing inflation, price increases finally started to slow down over the past 12 months or so. In January 2023, the CPI sat at 10.1%. The latest figures had it at 3.9%.

Also, house prices proved resilient, no matter how many people predicted a crash. At the beginning of the year, the average UK property price was £286,072, according to land registry data. By October, it was £287,782.

The mortgage market faced a year of two halves in 2023. Mortgage rates rose from early 2023, while interest servicing costs hit homeowners throughout the year. But, following a peak in the summer, mortgage rates dropped significantly.

All this seems to be filtering through to the market. Optimism is slowly, but surely returning. More homeowners and buyers believe house prices could rise over the coming year. The majority of private landlords in the UK are optimistic about the performance of their property investments. Many other property professionals – including lenders, brokers, and surveyors – are confident that market conditions will improve in 2024.

This bodes well for bridging trends in the specialist market which, unlike others in the lending scene, had a solid year in 2023.

Bridging trends in 2023: specialist lending was there for struggling borrowers

Bridging lending went from strength-to-strength last year. This isn’t entirely surprising. Whenever the mainstream market struggles, bridging is often there to offer support to borrowers and investors.

And 2023 seemed to be a typical year for this. Bridging loan books just wouldn’t stop growing, reaching new record highs quarter after quarter. In the opening months of 2023, loan books across the industry rose by 4%, totaling £6.8bn. In Q2, they rose further to just over £7.1bn, and then hit £7.3bn by the autumn.

There was plenty of demand for bridging products throughout 2023. Which is unsurprising given how much uncertainty lingered on the high street.

As our Q3 report showed, mortgage applicants struggled last year. Of those who had applied for a mortgage in the lead-up to the winter months, many ended up seeing their mortgage withdrawn by the provider while they were applying for it.

Also, many others struggled with affordability checks, agreements that ended up falling through, and lost money on property-related fees and legal costs.

These kinds of issues proved so prevalent that many borrowers turned to the specialist market out of necessity. The majority (74%) of borrowers felt there was a lack of certainty and assurance being provided by lenders. Meanwhile, 69% felt there was a lack of flexibility from lenders.

As a result of these problems, 56% of all applicant types confirmed they were looking for alternative lenders to help finance their purchases. This rose to 68% for property investors specifically.

Given what could be on the horizon, these preferences may lead to another busy year for the specialist lending industry.

Property and bridging trends in 2024

House prices may fall in 2024, albeit only slightly. Also, while mortgage rates are coming down, they’re still comparatively high to recent years. They may not fall back to around the 4.5% mark until the second half of 2024.

But, if house prices don’t bounce back this year, they’re likely to do so from 2025. Meanwhile, mortgage lending could also rise once more from next year.

What this could mean is that borrowers have a limited window of opportunity to invest in property at a discount in 2024. They may also be likely to seek out specialist providers to help with this while mainstream lenders get their affairs in order ahead of 2025.

Indeed, UK Finance expects arrears to rise to 128,800 cases by the end of 2024. High street banks, given what we’ve seen, may be unwilling to deal with this over the coming months. This leaves space for specialist lenders to swoop in and support borrowers with financial blips on their records.

In fact, gross lending, BTL lending, internal product transfers, external remortgaging, and more are all expected to fall in 2024. Fortunately, here at MFS, we’re optimistic about our ability to help with all these financial end-goals.

2024 outlook for MFS

With multiple institutional funding lines available, coupled with access to many lender panels, we’re confident that we’ll be able to support brokers and their borrowers over the coming months.

This confidence is shared among intermediaries in the market. Even with everything the last few years have thrown at them, many brokers remain confident about 2024. In 2023, many brokers diversified into new markets, including bridging, BTL, and commercial lending. This is set to continue in 2024.

At MFS, we’re primed to help brokers seeking out specialist finance. No matter what bridging trends emerge in 2024, we’ll adapt to the needs of market.

Our spectrum of bridging products can help with all manner of property investment strategies. Which includes straightforward residential purchases, through to complicated refinancing plans. Every application will still be assessed on a case-by-case basis in 2024. Providing optionality for those with poor credit histories, complex corporate setups, or CCJs on their records.

Our BTL mortgages are also available to new and experienced landlords alike. Also, outside of our financial products, we have numerous, free resources at the ready to support our clients.

Our calculators can help investors budget effectively and plan out their strategies. We’ll continue to produce blogs, guides, reports, and more to help readers keep up with the latest bridging trends and property news.

Should any of our clients still have questions after all this, our team will be ready to provide as much clarity as possible within 4 hours of receiving a query. We expect the next 12 months to be busy. But we’re more than ready to deal with that, and push the market to new heights.