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Lauren Evans

Detailed Analysis of the EY UK Bridging Market Survey 2024

By Uncategorized

The 2024 EY UK Bridging Market Survey offers a comprehensive look into the evolving landscape of the UK bridging finance sector. Conducted between February and March 2024, the survey gathers insights from 39 lenders and brokers, shedding light on market trends, challenges, and strategic priorities shaping the industry.

Positive Market Sentiment Amid Economic Uncertainty

Despite facing a complex macroeconomic environment, the UK bridging finance market remains optimistic about its growth prospects. According to the survey, 67% of respondents anticipate an increase in annual originations. This positive outlook is highlighted by a reduction in macroeconomic uncertainty compared to the previous year, even as the market adjusts to higher interest rates. The sector’s resilience is evident in its ability to adapt to these financial pressures, maintaining a focus on loan performance and foreclosure activity.

Technological Integration: A Key Strategic Objective

Technology has emerged as a critical area of focus for bridging finance lenders in 2024. An impressive 80% of survey participants view technology investment as a strategic priority, a significant rise from 58% in 2023. This shift underscores the industry’s move towards greater automation and data-driven decision-making, aimed at enhancing loan approval processes, improving risk management, and increasing overall efficiency. The adoption of technology is not just about keeping pace with competitors; it’s about redefining the customer journey and adding value through expert judgment in key areas.

Market Characteristics and Trends

Several key trends are shaping the UK bridging finance market:

· Interest Rates and Loan Terms: There has been a notable increase in average monthly interest rates, with most loans now priced between 1.00% and 1.25%. This rise reflects the broader economic environment, where increased base rates are successfully passed on to customers. Additionally, the average loan term has extended, with a significant number of loans now spanning 9-12 months, highlighting a trend towards longer-term financing solutions.

· Loan Sizes and LTV’s: The average loan size has grown, with more loans exceeding £600k. This trend indicates that bridging loans are increasingly used for higher-value properties, possibly driven by inflationary effects and a changing property mix. Despite the increase in loan sizes, the average loan-to-value (LTV) ratios have remained stable, primarily within the 60%-70% range. This stability suggests a balanced approach to risk management within the sector.

· Borrower Preferences: Refurbishment remains the leading reason for obtaining bridging loans, consistent with trends observed in previous years. Auction purchases have also become more popular, reflecting a market preference for quick, reliable financing options in a competitive property environment. This shift aligns with the rising demand for bridging loans that can offer the speed and certainty required for auction properties.

Challenges and Competitive Dynamics

The survey identifies several critical challenges facing the bridging finance market:

· Loan Performance and Access to Capital: Loan performance has been highlighted as the most significant challenge, followed closely by the ability to access equity capital for growth. In a higher interest rate environment, managing loan performance is crucial for maintaining profitability and stability. The demand for growth capital has increased, reflecting lenders’ need to adapt to competitive pressures and expand their market presence.

· Increased Competition: Competition within the sector has intensified, with both traditional banks and challenger banks increasing their focus on bridging finance. This heightened competition drives lenders to diversify their product offerings and seek strategic growth opportunities through mergers and acquisitions. Notably, 28% of respondents are considering M&A activities as part of their growth strategy.

Macroeconomic Impact on the Bridging Market

The macroeconomic outlook for 2024 presents a mixed picture for the UK bridging finance market. While 53% of respondents believe that the macroeconomic environment will positively impact the sector, 39% foresee potential negative effects. Concerns include geopolitical tensions, such as the conflicts in Ukraine and the Middle East, and uncertainties surrounding general elections in the UK and the US.

Despite these concerns, the bridging finance market remains attractive due to its ability to provide short-term debt solutions in an uncertain economic climate. The flexibility and speed of bridging loans make them a valuable option for borrowers navigating fluctuating interest rates and inflationary pressures.

Environmental, Social, and Governance (ESG) Considerations

ESG strategies are becoming increasingly important for bridging finance lenders. The survey indicates that 74% of respondents plan to implement an ESG strategy within the next 12 months, up from 58% in 2023. While technology investment and product diversification are immediate priorities, sustainability remains a long-term strategic imperative. Lenders are exploring various green finance tools, including launching ESG-related bridging products and implementing carbon offset measures.

Conclusion

The EY UK Bridging Market Survey 2024 highlights the resilience and adaptability of the bridging finance sector amidst economic challenges. With a strong emphasis on technology, strategic capital management, and competitive positioning, the market is well-equipped to navigate the complexities of 2024 and beyond. EY’s Financial Services Strategy & Transactions team stands ready to support bridging finance lenders and brokers with tailored advisory services, ensuring they achieve their strategic goals in this dynamic environment.

The Labour Party’s 2024 Housing Manifesto: A Strategic Vision for Addressing the UK’s Housing Crisis 

By Blog

The Labour Party’s 2024 housing manifesto outlines an ambitious and comprehensive plan to tackle the UK’s housing challenges. The manifesto focuses on increasing housing supply, protecting greenbelt areas, enhancing affordable housing, strengthening renter protections, and reforming leasehold arrangements. Here’s a detailed overview of the key highlights and their potential impact on the UK housing market. 

Housing Development and Supply 

The Labour Party targets a substantial increase in housing supply, with a goal to build 1.5 million new homes over the next parliament. The strategy includes: 

    • Updating the National Policy Planning Framework: This will involve restoring mandatory housing targets and emphasizing brownfield first development, which prioritizes the redevelopment of previously used land.

Greenbelt and Strategic Planning 

The manifesto stresses the importance of strategic planning to balance development needs with environmental protection: 

    • Preserving Greenbelt Land: Protecting greenbelt areas while focusing on the release of lower quality ‘grey belt’ land for development.
    • Building New Towns: Developing a new generation of towns and engaging in large-scale urban regeneration projects to create vibrant, sustainable communities.

Affordable Housing 

Labour commits to delivering the largest increase in social and affordable housebuilding in a generation by: 

    • Strengthening Planning Obligations: Ensuring that new developments include a significant proportion of affordable housing to meet the needs of low and middle-income families.

Renter Protections 

To create a fairer and more secure rental market, Labour proposes: 

    • Abolishing Section 21 ‘No Fault’ Evictions: Preventing unfair evictions and exploitation in the private rented sector.
    • Implementing Higher Standards: Introducing stricter regulations to improve the quality and safety of rental properties.

Building Safety and Leasehold Reforms 

Addressing safety and leasehold issues is another critical area of focus: 

    • Improving Building Safety: Taking decisive action to enhance building safety standards.
    • Ending the Feudal Leasehold System: Abolishing residential leaseholds and capping ground rents to eliminate unfair practices and empower homeowners.

Potential Impact on the UK Housing Market 

Increase in Housing Supply 

Both the Labour Party and the Liberal Democrats propose significant increases in housing supply, which could alleviate the current housing shortage and stabilize or reduce house prices over time. This increased construction activity is also expected to stimulate economic growth and job creation in the construction and related sectors. 

Renter Protections 

Enhanced protections for renters, including longer tenancies and a ban on no-fault evictions, could improve housing stability and affordability for tenants. Establishing a national register of landlords and implementing higher rental standards may further enhance the quality of rental properties. 

Leasehold Reforms 

Abolishing residential leaseholds and capping ground rents could empower homeowners and eliminate unfair practices associated with leaseholds, potentially increasing property ownership satisfaction. 

Homelessness Initiatives 

Efforts to end rough sleeping and provide emergency accommodation could significantly reduce homelessness rates and improve public health and safety. 

Energy Efficiency and Green Homes 

Programs aimed at making homes more energy-efficient and zero-carbon could reduce energy costs for homeowners and contribute to environmental sustainability. 

Conclusion 

Overall, the proposed policies by both the Labour Party and the Liberal Democrats aim to address housing shortages, enhance tenant protections, and improve housing quality and affordability. If successfully implemented, these policies could significantly impact the UK housing market, promoting a more balanced and equitable housing sector. The focus on sustainability, affordability, and fairness reflects a comprehensive approach to resolving one of the most pressing issues facing the UK today.