The after-effects of the economic turbulence triggered by COVID-19 are likely to be felt for some time. Coupled with record inflation and complications associated with the war in Ukraine, the UK’s economy is by no means out of the woods as of yet.
Consequently, banks and brokers are expecting to be presented with more complex cases than ever before – both from private borrowers and commercial customers. This is where the UK’s specialist lending sector excels, providing access to a far more flexible and accessible range of products than mainstream banks and lenders.
Gross lending on the specialist market has not quite bounced back to pre-pandemic norms, but is well on its way to doing so. The UK’s booming housing market has been a key driver for the sector, with ferocious competition forcing more buyers than ever before to consider alternatives to traditional mortgages.
In particular, buyers looking to make prompt purchases and avoid becoming part of a property chain have flocked to the specialist lending sector.
A Boom for Bridging Loans
Last year, total bridging loan volumes increased by a huge 38% compared to 2020, when the market’s performance was hampered by several consecutive lockdowns. Even so, most experts have predicted that the market will retain its momentum indefinitely, driven once again by frenzied competition on the UK’s housing market.
As households and commercial buyers continue to seek fast-access funding to beat rival bidders to the punch, bridging finance in particular is likely to prove a popular choice.
Regulated bridging loans accounted for fewer than 41% of all bridging transactions completed in 2021. Purchasing an investment property remained the most popular use of bridging loans last year, followed in second place by ‘funding a chain break’ which accounted for 18% of all transactions.
An increase of 1% from last year, but an indication that the market is still moving in a positive direction.
None of this has come as much of a surprise to market-watchers, as average house prices continue to hover at all-time highs. The average market value of a home in the UK has increased by around £40,000 since COVID-19 landed – exponentially more than the average £9,000 increase over the two years prior to the pandemic.
Severe Stock Shortages
Demand for affordable homes continues to outstrip supply by a country mile in all key areas of the UK. Movers and first-time buyers alike are finding themselves with little choice but to explore every option available to minimise the risk of losing out to rival bidders.
Lastly, with millions set to continue working from home indefinitely, the UK public remains committed to making the most of all available space at home. This is another important driver for the specialist lending sector, where products like bridging loans have become a popular choice for funding all types of residential renovation projects.