The Bridging Forecast 2021.
Yes, we know that making predictions is a dark art at the best of times – who saw 2020 coming? But our experts work alongside brokers day in, day out, and are active voices in the lending community.
As a result, we think if there’s anyone in a position to make predictions for the bridging loan market in 2021, it’s them. So we’ve asked one of our Intermediary Sales Managers, Paula Purdy, for her thoughts on what we can expect between now and the end of the year.
Here’s what she said as we caught up over a video chat.
1. Q1 boom in Auction purchases
“The Stamp Duty holiday is scheduled to end on 31st March, and there’s a lot of chatter in the industry at the moment calling for an extension to the deadline as a result of the latest lockdown.
“I think this could go either way; on current form, you’d be forgiven for believing that the Government will announce an extension but leave it to the last minute to do so – and this kind of uncertainty is investors’ worst nightmare.
“This is why I think we’re going to see lots of competition at auctions, because of their fixed completion dates. These offer both buyer and vendor some assurances about completing before the deadline, should the extension not happen.”
2. Motivated vendors
“We often think of bridging finance in terms of impatient buyers: people who’ve found the ideal property, and want to secure it before they’ve found a buyer themselves.
“This year, I think we’re going to see a lot of vendors keen to secure a quick sale – so they’ll be looking at cash buyers and those willing to take a bridging loan. I say this because of the prevailing economic circumstances; there’ll be many businesses and homeowners who need to act fast to raise capital – perhaps to pay down or consolidate debts accrued through the difficult recent months.
“Of course, there’ll still be impatient buyers who’ll use bridges to accelerate their move, and there may be increased demand here – either because of issues further down the chain caused by difficulty accessing finance, or because they’ve had to rethink their personal and family circumstances at short notice.”
3. Growth in Change of Use
“The news is awash with reports of retailers in trouble, but in truth the pandemic has simply accelerated changes to our shopping habits that were already happening. There’s still a role for our local high streets beyond traditional retail, but I still expect to see a lot of vacant units going through conversion to residential dwellings – especially given the recent changes to permitted development. I think this is one of the reasons that there’s steady demand for Heavy Refurbishment bridges.
“I’m of the opinion that talk of ‘the end of the office’ is premature, and many workers will want to return to the buzz and camaraderie of the workplace after such an extended period working from home. So while some out-of-use offices will continue to be converted as before the pandemic, I don’t think we’ll see a surge in conversions of this kind.”
4. Competition among lenders
“Record-low interest rates have made it possible for lenders to access capital cheaply, but it’ll start costing them money if nobody borrows it. So I believe that lenders will be keen to do business, and therefore looking at ways to become more attractive.
“There are several levers lenders can pull to achieve this, including pricing, criteria, and service – so as the vaccine rollout begins to have an impact on consumer confidence and a related ramp up in demand arrives in the second half of the year, I would expect there to be some movement on these.”
5. Cautious business borrowing
“Businesses have seen a lot of support options made available over the last year, including some long-term Government-backed loans. I’ve become aware that many have taken these out, even if they weren’t strictly needed, and banked the money knowing that the loans are affordable and unsecured.
“With this in mind, I think demand for second-charge unregulated bridges could be stifled, as nervous business owners consider the consequences of taking on secured debt.”
6. Steady prices
“There are some unavoidable facts about the effects of the pandemic, and one of those is an increase in the number of properties coming to the market.
“This availability, coupled with the end of the Stamp Duty holiday and the Job Support Scheme later in the year, I believe will likely offset pent-up demand among first-time buyers and dampen house price growth. I wouldn’t go as far as predicting a drop in prices, as has been mooted in some corners, but I think things will stay steady.”
Thank you Paula! Do you think that sounds a reasonable set of predictions? Let us know on LinkedIn and let’s keep the conversation going.
Lending decisions are subject to an affordability/creditworthiness assessment.
Any property used as security, including your home, may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.