A stuttering sales market, down-valuations and cost overruns are seeing more and more developers struggle to exit their bridging finance, according to brokers — and re-bridging is becoming more common as a result.
Tom Singleton, Partnerships Director at Melius Commercial, said: “We are seeing a growing number of developers struggling to exit their bridging finance – and it’s becoming an increasingly common concern across the market.
“There are several key factors driving this, including a slowdown in the sales market, reduced LTVs from exit lenders, down-valuations on completed schemes, cost overruns and delays. One of our clients completed a six-unit scheme in the Midlands and intended to repay the bridge via sales. However, despite strong rental demand, sales stalled and valuations came in lower than expected. Their refinance offer was reduced by £200,000, leaving a shortfall.”
Sales are dragging
Adam Stiles, Managing Director at Helix Financial Partners, said re-bridging is on the rise as a result of the stagnant sales market: “Re-bridging used to be a dirty word and not many bridging lenders would consider it. The fact it’s quite normal now is a shift that reflects the market we are in. The ability to refinance has improved but sales are dragging, which is causing the need to re-bridge. We are seeing developers having to reduce prices to shift their remaining stock or consider holding onto stock on investment term debt.”
Ranald Mitchell, Director at Charwin Mortgages, is another broker who says exit struggles are becoming more common in bridging finance: “We’re hearing more about developers getting stuck on their bridges, and it’s no surprise. Re-bridging is rising because sales are stalling. Tight timelines, punchy valuations and a jittery market don’t mix. Builders banking on quick exits are now facing slower sales, tougher refinancing and, in some cases, the painful reality of cutting prices to get stock moving.”
Bob Singh, Founder at Chess Mortgages, said developers need to go into the market eyes wide open and that specialist lenders are not always patient: “Many developers use short term finance to build their projects and exit as soon as possible. In reality, things do not always turn out this way due to red tape, bureaucracy, planning laws, lender criteria, longer timescales, cost over-runs, labour shortages, material supply issues and so on. Development lenders have limited patience and will pull the rug from beneath the borrower’s feet even when redemption is imminent. These lenders do not have a public image to maintain and neither do they really care about repeat business. It’s profits and returns that motivate their actions.”
The exit is key
Riz Malik, Director at R3 Wealth, also sounded a note of caution: “With any type of development finance, the exit is key. The problem some are having is relying on the sale of the underlying security in a timely fashion, and getting the necessary price for it. This can no longer be relied upon. That’s what’s causing more exit issues within the bridging finance sector at present.”
Meanwhile, Mark Posniak , Managing Director, Short Term Finance at Maslow Capital, said developers need to be wary of being over-optimistic: “The recent uptick in re-bridging requests is a timely reminder that exit risk must be managed from day one, not treated as an after-thought. In today’s slower sales environment, developers need to take a hard-nosed view on achievable values. Over-optimistic pricing assumptions only paper over the cracks and ultimately delay the inevitable.
“Equally important is robust monitoring. When lender, borrower and monitoring surveyor work in tandem, potential cost overruns or timetable slippage are identified early, giving all parties time to act. With the right controls in place, loans should never reach a point where a last-minute, premium-priced refinance is the only option.”
