Bridging lending surges in 2022
The bridging lending market has shown steady growth since the start of 2022. After the lockdown, property finance saw a hive of activity.
It increased competition in the housing sector. Thus, people took bridging loans to grab opportunities and beat the competition.
This article will explore how bridging loans remained unbeatable despite untameable inflation in 2022. You will find some worth-noting facts in this article.
How can bridging trends help you in making the right lending decisions?
Bridging loan trends are gathered to make sense of the current UK market. These trends help lenders and borrowers to make logical decisions based on facts and figures.
Mostly, people who take bridging loans are property developers. They may have different projects on the ground and need money to fund them.
Bridging loans appear as a suitable option for them because they want a huge lump sum in a short time. Thus, they move towards a Peer to Peer Lending UK platform to secure a loan on a property.
As the UK’s economy is undergoing major overhauls, investors and borrowers need to keep their eyes on the real-time data.
The year 2022, however, brought a boom for bridging loans. That said, you must know how bridging lending saw positive growth in the current year.
Bridging loans trends in Q1 2022
The start of the year 2022 wasn’t much positive for bridging lending. Compared to the last quarter of 2021, the number of bridging loan applications dropped abruptly.
That said, the overall growth in this industry surged mainly due to these reasons.
- More demand in the housing sector.
- Intense competition.
- Low-interest rates of bridging finance.
- Economic activities resumed.
As economic activity resumed, people started entering the dormant housing market. They needed instant money to complete their ongoing projects, buy new houses, or start a property project.
It rose to intense competition as the supply of houses was much lower than the demand. It brought people to bridging loans.
The first quarter showed an annual gross growth of 8.5% in the first quarter. Thus, the Q1 went well for the bridging lending sector.
Bridging loans trends in Q2 2022
The second quarter of 2022 is well known for the bridging lending boom. At the end of this quarter, the total lent money was £178.44 Million. These figures show the interest of property developers in this type of loan.
People reached out to get a P2P lending platform because the interest rates dropped to historic lows.
The monthly interest rates reached a small figure of 0.69% in the second quarter, making bridging loans a suitable finance for Uk property business.
A distinctive feature of this quarter was that investors gained confidence in purchasing an investment property for commercial or BTL purposes.
Are bridging loans still surging in the two quarters of 2022?
The current data shows that bridging lending will rise unabatedly by 2022. According to Henry Dannel, the number of bridging loan buyers has increased significantly.
The cost of living crisis and untameable inflation has forced the Bank of England to take some bold steps to save the faltering economy in the UK.
That’s why BOE has increased its base rate to 2.25%, rising the mortgages. Since the rise of base rates may affect the bridging interest rates, we haven’t seen any significant rise yet.
Therefore, the bridging market is full of activity. Experts say that the rising house prices due to mortgages will decrease the demand.
As a result, house prices will again decrease, causing more people to enter the market. As a result, more people in the bridging sector will surge in the future.
Apart from that, people will likely go for bridging finance as the recession looms over the economy.
Due to high inflation, property developers may find some bridging finance to complete their projects in less time.
Moreover, small businesses may feel vulnerable due to loss of payments and cash flow issues.
They can also go for short-term finance to resolve cash flow issues. The market value of bridging finance is projected to rise by 44% from 2022-2027.
Why are people moving towards bridging loans?
There are many reasons behind the current surge in the bridging loans industry. Some of them might be complex, while others are simple. We will discuss two indicators that can cause the surge in bridging lending.
Strict criteria of mortgage lending
The rising mortgage interest rates have caused Uk banks toward a difficult path. Banks know that borrowers are likely to default on higher rates. That’s why they have made their lending criteria stricter than before.
As a result, it becomes hard for common individuals and businesses to get a mortgage loan.
Thus, people propel from getting a mortgage and choose P2P lending platforms for short-term finance.
Lower bridging loan interests
Two things are in the mind of a property developer in the current inflation. First, their project should be completed as early as possible. Second, the repayment should remain low.
In the current circumstances, a bridging loan provides both reasons to get a loan. The interest rate is around 0.69% per month. So, the cumulative interest rate becomes 8.7% per year.
Thus, the lower interest rates make it a premium offer for investors to move towards bridging finance compared to other options.
Bridging finance surges in 2022 due to various factors. It all started with the rise in demand for housing, which caused people to sign up for a short-term loans to beat the competition.
Also, the interest rates of UK bridging loans decreased to historic low numbers. As a result, people preferred bridging finance over other types of loans.
We have enlisted a list of factors that resulted in the surge of bridging loans. If you have read the article, let us know your feedback.