Bridging lenders face old problems in a changing market

Steven Barber (pictured top) has seen the bridging market evolve from the ground up. "We literally started from a blank sheet of paper 19 years ago," said Barber, founder and director of Bridging Finance Solutions Group. Based in the North West and one of just 11 non-bank regulated bridging firms in the UK, Barber's firm focuses on small-scale development and bridging deals outside of London. "Virtually everything we do is north of Birmingham," he said.  

While volumes are growing, lenders face operational constraints that technology alone hasn't solved. "People are investing in tech, but I think people are still playing lip service to AI," said Barber. "The number of true use cases of AI being applied to underwriting in the specialist bridging sector is limited."  

Legal delays remain a core challenge  

Despite improvements in APIs and onboarding tools, Barber sees legal inefficiencies as the biggest bottleneck. "The principal driver of the delay is still the legal system," he said, noting a shortage of experienced property lawyers, especially in the North. "Most borrowers' lawyers treat it as a standard conveyance, because they just don't have the internal expertise or systems to expedite loans quickly."  

Efforts like joint representation haven't resolved the issue. "The Chinese walls that have to go in place internally can actually create more problems," Barber said. "The biggest problem is a lack of expertise within local solicitors of handling bridging."  

Demand shifts and pricing divergence  

Barber reports rising demand for small-scale development deals under £1 million and regulated self-build transactions. "Chain breaking is up quite a lot," he said, adding that more borrowers are using bridging to manage tax bills, fund business liquidity, or cover inheritance costs.  

This has come with clearer market segmentation. "The best brokers understand which lenders fit in terms of deal size, geography, credit profile, risk, property type," Barber said. "The market is maturing and different lenders are falling into their individual niches."  

Pricing strategies reflect this divide. "There is still a very significant division in the sector between lenders who are providing short-term mortgages and those who are providing true bridging," he said. While the former offers lower rates, true bridging lenders typically price higher due to more complex underwriting and faster turnarounds. "What I'm seeing is a race for the top in terms of loan-to-values, and a race for the bottom in terms of rates," he added.  

Broker priorities and underwriting discipline  

Experienced brokers, Barber said, are less focused on rate and more on deliverability. "There's nothing worse in this sector than a slow 'no'," he said. "It's not just the interest rate, it's the fees that make a massive difference."  

He cautions against hidden costs in the unregulated space. "We see a lot of lenders who will quote very low interest rates, but then make it back on fees," he said.  

Exit strategy underwriting has also grown more complex. "We're underwriting backwards from exit," Barber said, especially in regulated cases where affordability constraints now limit borrowing. "It's about ensuring that borrowers can get out before we get in."  

On the unregulated side, rising rates and stricter buy-to-let requirements are lengthening exits. "Whether that's the borrower refinancing or selling, the exit is harder," he said.  

Better packaging and smarter tech  

Incomplete broker submissions remain a frustration. "When the half-presented case from a broker is, it can be very painful," Barber said. His firm is launching an in-house broker portal to guide submissions and automate tasks like credit checks and Land Registry verification. "We're basically not going to accept half-hearted applications because there's no point."  

Despite attempts to build a centralised bridging sourcing system, complexity has blocked progress. "People have tried for 20 years," Barber said. "But there's just too many variables."  

Outlook: smarter niches, not one-size-fits-all  

For lenders and brokers alike, the maturing market rewards specialisation and clarity. "Trying to get market share in a market that's already a bit over capacity is quite difficult," Barber said. "Lenders have to differentiate themselves by way of risk or by doing something differently in terms of rate."  

For now, Barber believes discipline and good data, not the latest tech trend, will be what sets lenders apart. "It's about looking at the deal in aggregate," he said, "and making sure people are comparing apples with apples."