Q1 Bridging Finance Forecast 2021

2020 was a turbulent year for the financial industry. Still, with signs of the pandemic beginning to ease and as the property market begins to show signs of improvement, we have put together a forecast for Bridging Finance in 2021. 

The bridging market thrives on foresight and stability, and the pandemic slashed any positive predictions when bridging loan volumes fell by over £167 million (45%) in the first half of 2020 compared to Q1 and Q2 2019.

However, as the first COVID-19 lockdown came to an end, the sector subsequently experienced a strong rebound, with transactions totalling £115 million in Q3 – up 46% on the previous quarter. The bridging sector finished 2020 on a strong note, so there is a lot to be optimistic about in 2021.

  1. Boom in property auction purchases

The Stamp Duty holiday comes to an end on the 31st March, and there’s chatter in the industry calling for an extension to the deadline. Due to such demand from the public to extend the tax cut, MPs have already discussed a possible extension. However, a final decision will more likely be announced in the Chancellor’s budget in March. 

Uncertainty around the Stamp Duty holiday extension could result in high competition at auctions due to their fixed completion dates. Should the extension not happen, these auction purchases offer both vendor and buyer more assurances.

Incentives such as the Help to Buy scheme and low-interest rates will fuel demand for property this year. If the Stamp Duty holiday is extended, it could lead to even more demand within the housing market. Moreover, the possible lifting of travel restrictions could see demand from international buyers return to pre-Covid levels, improving recovery and growth in the economy.

2. Competition amongst lenders

Record-low interest rates have meant that lenders can access their capital cheaply. However, it could start costing the lenders money if nobody borrows their capital. Lenders will be keen to do more business and look at ways to become more attractive than competitors. As the vaccine rollout starts to increase consumer confidence throughout the year, lenders will begin to offer more attractive rates.

3. The return of the construction industry to pre-Covid levels

The fast rollout of the COVID-19 vaccination in the UK could allow most aspects of the property industry to return to a considerable degree of normality by Q3 of this year – including investment, construction and sales. The return of construction and development projects will increase the demand for bridging finance from developers.

4. Could 2021 be the year of the Holiday Let?

2021 is looking to be the year of the staycation, and British holiday homeowners are raking in the profits as travel restrictions, and Brexit has caused a boom in demand for Holiday Lets.

A surge in bookings for short-term holiday lets is forecasted once lockdown restrictions are eased and serve as a golden opportunity for investors which cannot be missed.

5. Demand for conversions, renovations or refurbishments

The pandemic has had a huge impact on many industries, but one of the hardest-hit sectors has been the retail industry.

The closure of retailers has forced a change in shopping habits and created a surge in online shopping, leaving many retail units vacant. Conversions from retail units to residential could begin to become popular, which could cause an increased demand for Heavy Refurbishment bridges.