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Once again, fears over inflation are having a negative knock-on effect on swap rates, which have risen rapidly over the past month or so.
That has resulted in a wave of repricing in the BTL markets which makes it more difficult for many borrowers to obtain finance.
Look across at the bridging sector on the other hand, and you see a market that is faring significantly better.
According to the latest Bridging Trends survey, volumes were up 68% in Q1 2023 from the previous quarter.
While the survey is not a complete snapshot of the market, it is a useful barometer of activity nonetheless and chimes with what we have witnessed with our own book and pipeline.
Why, then, is the bridging sector seemingly operating at a different pace to the mainstream residential and BTL markets?
We are starting to see an increasing number of borrowers who, faced with the prospect of locking in at a much higher rate on their mortgage, are turning to bridging loans.
There will also be borrowers out there who are turning to bridging finance because soaring mortgage rates mean no longer meet lenders' requirements.
The draw of a bridging loan is that the term is short and the rate is fixed.
Therefore, borrowers who think the market will calm and rates will fall in the next 12 months know they can take advantage of those benefits until when, or if, conditions improve.
For these borrowers rate becomes less important than flexibility, service, and speed and certainty of execution.
This means the bridging sector has become far more insulated to interest rate movements than the residential and BTL sectors.
Of course, that dynamic may change and until it does, it will provide a natural tailwind for the bridging market.
This tells me that Q1's bumper lending figures are unlikely to be a fluke and will most likely be replicated in the coming quarters.
Published in Bridging & Commercial | July 2023
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