As banks close their doors to property developers, bridging loan activity spikes

Here, we look at how the EU referendum has impacted on bank lending to property developers.

As things stand right now, it’s something of a bittersweet picture for property developers seeking finance.

On the positive side of things, interest rates for the vast majority of commercial borrowing products are hovering around the lowest levels they have been in some time. In some instances, pretty close to record-lows. On the flipside of the coin, it is becoming increasingly clear that major lenders are becoming increasingly reluctant to work with property developers.

The latest figures suggest that the slowdown in lending to property developers around the time of EU referendum in 2016 hasn’t recovered a great deal in the interim. A report published by the Bank of England this week has shown that while December 2015 saw £16 billion made available to property developers, this fell to £14.8 billion for December 2016.

In terms of why it is that this particular area of the lending market remains turbulent, experts believe that the uncertainty of Brexit’s short and long-term effect on the property development market is leading to growing reluctance among lenders to work with borrowers from this particular area.

‘Brexit uncertainty has hit property developers hard over the last year as traditional sources of funding tighten their belts,’ comments Gary Latham.

‘Despite Brexit, the advantages of investing in UK property remain in place. There is a wealth of good investment opportunities out there and although banks may be paring down lending in the sector, it’s business as usual for alternative finance providers.’

But while it has become clear that traditional lenders are closing their doors to property developers at least temporarily, those who work in alternative financial service provision are welcoming property developers with open arms. In particular, the growing bridging loans industry has noted an exceptional increase in the number of applications and the level of general activity spanning this once-undervalued sector.

What sets bridging loans apart from conventional financial services and products is the way in which they can be extensively tailored to meet the needs of property developers at all levels. Quite the contrary to traditional mortgages and borrowing services, the exact amount of capital required can be provided near instantly and repaid over a much shorter period.

This in turn can help keep all attached fees and interest rates to absolute minimums – particularly during a period where burrowing costs in general are at rock-bottom levels.

‘The beauty of a bridging loan is that it can be arranged quickly and is more flexible than a mortgage. Lending decisions on bridging loans can be made within hours of the initial enquiry to the lender and the money can be made available within days.’ –

Recently, the bridging loan sector reported approaching the £3 billion value threshold for the very first time, spurred by a growing interest among commercial and residential borrowers alike. All of which is particularly significant when considering the fact that just a few years ago, alternative financial products and services like these were considered to be excessively costly ‘last resort’ options for use in emergency situations only.

Further reading on business loans

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Owen Gough, SmallBusiness UK

Freddie Halvorson

Owen was a reporter for Bonhill Group plc writing across the and titles before moving on to be a Digital Technology reporter for the

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