Back in 2016, shortly before the vote that would decide whether the UK will leave the European Union, the United Trust Bank had done some surveys regarding the bridging finance sector.
They wanted to find out if Brexit will have any sort of influence on the bridging loans market. Looking at the results, more than half of the respondents believed that the Brexit vote will come with no changes to their business. On the other hand, 31% of them believed that this vote will bring negative changes to the bridging finance market.
Before answering the question in the title, we must mention one small way through which Brexit affected the bridging loans UK market. Even though it is just a clause, it stands as proof for the people’s uncertainty as to what will happen after Brexit.
We refer to the Brexit Clause that most large commercial proportion transactions had specified in their contract. In short, this clause will allow the purchasers to exit from any future property transactions in case the market values will experience downside softening caused by the fact that the UK left the EU.
Moreover, it was believed that large commercial transactions funded by entities outside of the UK will have a certain degree of risk. Still, even at that time, the UK’s residential market was characterised by lack of supply and constantly increasing demand. This means that Brexit will not have any influence over the market in the end.
Statistics after the no-deal Brexit
On the 15th of January this year, 432 MPs voted against the Brexit deal, leaving the UK with much more uncertainty than before. In short, if the UK is to leave the European Union without a deal, the country’s Trade, Laws, People, and Money will be affected.
For instance, the UK will be subject to the EU’s external trade tariffs, thus forcing shop owners to either charge more or pay the tariffs themselves. Moreover, roughly 3 billion pounds will no longer be provided to the UK’s farmers if the country leaves without a deal.
Still – how did the events on January 15 affect the bridging loan market?
- The latest figures show that the annual bridging loan completions managed to hit 3.98 billion pounds for the first time ever.
- The fourth quarter of 2018 was characterised by an improvement of 21% when compared to 2017’s same period.
- Despite the continuous uncertainty related to Brexit, the UK’s interest in alternative financial services hasn’t vanished, so to say.
- Moreover, it has been shown that, back in 2018, the house prices in the UK were steadily rising – mainly due to the growing market demand – reaching a record high of 230,280 pounds. The house prices in the three months prior to July have increased by 3.3% compared with the same period of 2017.
In short, the UK’s property market didn’t flinch and is believed to remain resilient, no matter the results and conditions.
Furthermore, even though predicting what Brexit could mean for the UK and for the property market is difficult, the fact that the house prices have seen consistent growth after the EU referendum is quite encouraging. Everything the market needs is a strong demand for residential and commercial real estate from investors.
Does Brexit affect the bridging loans market?
From the aforementioned data, as well as from many other positive statistics regarding the bridging loans market, it is safe to say that this market has continued to grow. Even though the industry was faced with a lot of challenges, it has not collapsed or even showed signs of backing down.
This is mainly because the bridging loans market is a regulated business and it’s higher than the average. Moreover, it is expected that the demand for refinancing for bridging will only increase in 2019, even with Brexit around the corner.
- The market is too big – one of the most compelling aspects regarding the bridging loan market is the increase in loan volume. The numbers are huge – not only because of additional contributors. This makes us wonder how big is this market in fact – and, more importantly, how big can it get?
- The solution fit for borrowers – even if first charge holders will have their worries regarding Brexit and its implications on the market, it is believed that the demand for second charge loans will increase. This is mainly because of the data pricing that is constantly characterised by downward pressure, an aspect that makes bridging loans a simple, cost-effective, and fast solution for all borrowers.
All things considered, most analysts believe that the bridging industry will not be affected by any of Brexit’s results and changes to the market.
What keeps the bridging loans market alive?
Bridging finance is now considered as one of the best options that investors and brokers can rely on.
First of all, the core use of bridging finance is still standing high. Even if their property is being sold, some buyers still have a temporary, immediate need for capital in order to fund the purchase. Therefore, even in the case of a lacklustre residential market, bridging finance is still healthy – as the bridging redemptions are here to stay.
Moreover, it may be already well-known that most property professionals have realised the true value of bridging finance. People no longer apply for traditional development finance, as it can be quite a struggle. Instead, they rely on bridging funding from a company like Tiger Financial, which is quicker, comes with less hassle, and is usually fit for the developer’s needs.
The bottom line
The numbers and statistics do not lie.
As you’ve seen so far, most of the statistics regarding the bridging loans market are comparable to previous years – in some cases, they are even higher. Moreover, the demand for real estate is still at a high level, with more and more people looking to invest in property.
In the end, it goes without saying that alternative finance – especially bridging loans – will continue to be valuable in terms of supporting the growth of the property market. Bridging loans show that people can be confident when it comes to accessing the finance that they need in order to take advantage of the many opportunities related to real estate.
Also, given that these loans reduce the risk of obstacles and unnecessary delays that are common for mainstream lenders, it’s no wonder that the bridging loans market isn’t quite affected by Brexit.