As a packager, our role involves providing tailored financial solutions that address the specific needs of our clients, enabling them to confidently and effectively navigate a variety of property-related challenges. This is especially crucial in a market characterised by growing complexity, affordability concerns, and increasingly stringent mainstream lending criteria.
Short-term lending has become a vital financial mechanism in overcoming these challenges. As evident in the latest Bridging Trends report for Q2 2024 which sheds light on several key trends that we’ve observed firsthand, especially in the context of chain breaks, auction purchases, and the evolving needs of property professionals.
Chain breaks and the need for speed
Chain breaks have long been a thorn in the side of property transactions, and in Q2 2024, this issue has been more pronounced than ever. The slow-moving market, coupled with persistent conveyancing delays, has made it increasingly difficult for buyers and sellers to align all the links in property chains. According to the Bridging Trends report, preventing chain breaks was the most common reason for seeking bridging finance in this quarter, accounting for 23% of all cases.
The speed associated with short-term finance is crucial in these scenarios. We’ve worked closely with many different types of clients who found themselves in jeopardy of losing a property, and a substantial amount of money, due to a chain break.
Bridging finance allows them to complete their purchase while giving the seller more time to find a buyer for their property, at the right price. Flexibility which is invaluable in a market where timing is everything.
Auction purchases: navigating tight deadlines
Auctions have always been a fast-paced environment, but the growing popularity of online auctions has added new layers of complexity. In Q2 2024, auction purchases represented 14% of bridging finance usage, a significant increase from 9% in Q1. This rise is likely due to buyers seizing opportunities in a relatively flat market, where properties can be acquired below market value.
However, meeting the strict deadlines—28 days for traditional auctions and 56 days for online sales—remains a challenge, especially when mainstream lenders are hesitant to commit to such tight schedules. This is an area where we are often called upon to step in andsecure the necessary short-term finance, ensuring that our clients can meet these deadlines without risking their deposits. An aspect of our work which has become increasingly important with a growing number of property professionals now turning to the auctionprocess to expand their portfolios.
Shifting investment strategies and the role of refurbishment projects
The data also highlighted a shift in investment and funding strategies, with demand for re-bridge finance increasing from 6% of bridging loan purposes in Q1 to 9% in Q2.
In addition, more property professionals opted for heavy refurbishment projects, seeing a quarter-on-quarter rise from 9% to 11%. This type of approach tends to enlarge the potential for higher returns, but it also comes with increased risks.
In these cases, bridging finance becomes a crucial tool, providing the funds needed to complete the refurbishment and make the property suitable for a BTL exit. Our role as a packager is to navigate these complexities, ensuring that our clients have access to the right financial products at the right time.
The trends identified in this report affirm the critical role that bridging finance, specialist lenders and trusted packaging partners play in today’s property market. And we anticipate that this demand will only continue to grow in the coming quarters.
Donna Francis is managing director at Envelop
