The Bridging Market – How big can it get?

Over the last couple of months I have read in the trade press various figures for the size of the bridging market but I feel most of them are wide of the mark. From the numerous information sources that I have available to me it is clear that the bridging market is well over £1 billion. In my view an accurate estimate of the size of the bridging market is £1.2 billion.

These figures ignore the significant level of bridging loans that are provided by mainstream financial institutions. Many large financial institutions offer bridging loans, examples of these companies include RBS, both directly and via Coutts, UBS, Barclays and many other private banks.

There are no available figures for the bridging loans provided by these types of lenders, but the level of lending is likely to be measured in hundreds of millions. Although the type of bridging that these banks offer is significantly different to that of a specialist bridging company like Masthaven – as they tend to only offer this service to high net worth individuals – these bridging products are out there for the right borrowers. Masthaven and many of our competitors, whether they are aware of it or not, do lose a considerable amount of business to the mainstream lenders.

Moving onto the reasons for the recent growth in the bridging market is actually fairly straight forward. These reasons include the ‘closed shop’ approach of the mainstream lenders, the increased need for liquidity and the innovative approach by specialist lenders to create products that add real value.

In my view the key reason for the significant growth in the market is because of the increasing number of people who fall outside the ‘tick box’ underwriting approach of the mainstream lenders. These applicants tend to be asset rich but cash-flow poor. They own a property with significant amounts of equity but never has it been harder to turn this illiquid property asset into cash.

Other salient reasons include the banks reluctance to lend for business purposes. Thus, business owners who need capital in order to grow their company have little option but to use a bridging loan to fill this need.

The bridging loan market will continue to grow for as long as the mainstream lenders remain closed. I fully expect the market over the next three years to grow between 25 – 35 per cent.

Many lenders, including Masthaven, have recently experienced record levels of business. This has led to a significant number of new entrances into the market. These new players have a varying level of competence and expectations. It is up to the broker and the financial intermediary to be street smart enough to distinguish between the professional, well funded bridging lenders and the cowboy companies.

There has never been a better time to be a bridging broker, but just ensure that you link up with the right lenders. If you don’t you will find that your business and your reputation will quickly suffer.