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Bridging lending crashes through the £3bn mark

Annual bridging lending completions rose by 24.6% to over £3.5bn in 2017, ASTL figures show.

Bridging completions for ASTL members in the fourth quarter of 2017 exceeded £1bn, an increase of 31.7%.

Benson Hersch, chief executive of the ASTL said: “Our figures highlight that, despite ongoing concerns relating to Brexit and the property sector, the bridging finance industry remains in good shape and is ready and willing to meet the challenges that 2018 may bring.

“The bridging sector continues to provide a vital role in the economy by offering customers access to the capital they need in a responsible and sustainable way.   It continues to be an important part of the alternative finance market.”

The size of members’ loan books is also healthy. Total loan books are continuing to climb, with a rise of 4.6% compared to Q3 2017. Compared to the end of Q4 2016, the value of loan books has risen by 12.9%, to £3.7bn.

These figures are taken from the responses from ASTL members, which include most of the key lenders in the bridging market.

Source: Mortgage Introducer

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Does the market need more second charge bridging lenders?

A recent survey has found that the market is currently split over whether there is a need for more second charge bridging lenders.

The poll conducted by Bridging & Commercial saw 53% of respondents agree there needed to be more second charge bridging lenders, while the remaining 47% believed that the market didn’t.

The latest Bridging Trends report for Q4 2017 revealed that second charge bridging lending had increased for the third consecutive quarter.

Meanwhile, the report found that first charge bridging – although still significantly higher than second charge bridging (80.3% to 19.7%) – had fallen in terms of share when compared to Q3 2017 figures (82% to 18%).

Will more lenders move into the second charge bridging market?

“The industry tends to be split between those that fully understand, advise and have a history of lending in the second charge bridging sector, and those that don’t,” said Richard Tugwell, group intermediary director at Together.

“Lenders who don’t are more likely to label this kind of specialist lending as only for sub-prime customers.

“In reality – and along with other types of specialist lending – second charge bridging loans are proving an increasingly popular alternative, as the high street becomes more reluctant to lend in certain situations.”

James Bloom, managing director of short-term lending at Masthaven, believed there could be new entrants to the market: “…Competition is likely to increase over the coming year, as more lenders take advantage of relatively low-cost funding and face a growing need to get further funds placed into the market.

“However, this certainly doesn’t mean there isn’t room for further competition, particularly if a lender can enter the market with an innovative or more cost-effective proposition that really draws attention from customers.”

Daryl Norkett, senior sales at Shawbrook Commercial, added: “There are a large number of borrowers in the market looking to protect existing low interest rate mortgages, so the market potential is evident.

“There are still a number of first charge bridging lenders who aren’t offering second charge bridging, and this would be a natural next step in the evolution of those lenders product ranges – so more products are a likely future development.”

Jon Salisbury, managing director at Ortus Secured Finance, said: “I suspect we will see more lenders providing second charge loans as they compete for a share of this crowded market.

“The test will be whether they bring something new or offer more of the same.”

Avamore Capital is a bridging lender which doesn’t offer second charge products.

It said it wasn’t planning to enter that market, with Zuhair Mirza, principal at Avamore Capital, adding: “We’re not active in the second charge loan market, but the impression we get is there has been some price competition in that segment too, which would imply the market isn’t short of lenders for the existing products being offered.”

Paresh Raja, CEO of Market Financial Solutions, pointed out that institutionally funded bridging lenders typically preferred not to do second charges, but those who had more autonomy on funds could take a view and be more flexible.

“Risks include high LTVs, [with] unsuccessful projects, therefore, there is not much room for margin of error, especially for second charges.

“However, property prices have risen significantly over the years, therefore, there is a great opportunity to tap into the equity without breaking the mortgage deal and at the same time security is significantly backed up.

“This makes it more appetising to offer second charges.”

What do brokers think?

Chris Whitney, senior broker at Enness Commercial, felt that, from a broker’s perspective, there could never be too many lenders.

“…In theory, it drives competition and innovation, albeit time consuming for brokers to stay updated with all of them, so they can be sure they are giving clients [the] best advice.”

Chris Fairfax, managing director at Positive Lending, added: “The second charge bridging market is well-serviced, but rates have not fallen proportionately to reductions in first charge bridging and often LTVs are typically 5-10% lower than first charge.

“It would assume the split opinion is based on the assumption [that] any new lenders would not improve product, risk or pricing.

“All would welcome a new entrant if they genuinely add some value above [and] beyond what is currently available.”

Jo Breeden, managing director at Crystal Specialist Finance, felt second charge bridging was still a limited market, however, it was questionable just how much demand there was for this business type.

“What products do exist are now ERC free, offer cheaper rates and may be less risky and thus more suitable for clients.

“Lenders entering just because they see it as a profitable market may struggle, however, lenders that feel that [they] can add value – either as first or second charge – are the ones that will get business and improve the outcome for customers.

“But as always, it simply has [to] be the correct choice for the applicant based on what is available, and there are some excellent products in the market.”

Source: Bridging and Commercial

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Bridging lending up 10% to £534m as regulated sector strengthens

The bridging sector continued its recent growth with a 10% uplift last year as the regulated market continued to approach parity with the unregulated side.

According to the Bridging Trends report, bridging loan volume rose to £534.1m in 2017, up from £482.6m in 2016 and £432.5m in 2015.

The second and third quarters of the year were the strongest – with £150.7m completed in Q2 the highest overall.

Regulated activity rose to 46% of the market, up from 44% in 2016 and 36.6% in 2015, with regulated activity outperforming unregulated loans for the first time in Q1.

Average loan-to-value (LTV) levels dropped to 46.6% in 2017, down from 49% in 2016, while average monthly interest rates remained consistent throughout the year at 0.83%, down from 0.85% in 2016 and 0.91% in 2015.

Demand for bridging loans for refurbishments and auction purchases rose, although mortgage delays were again the most popular reason at 29% of all lending down from 34% of activity.

The data is collected from bridging lender MTF and brokers Brightstar Financial, Enness, Positive Lending and SPF Short Term Finance (SPF), to offer a general snapshot of the UK bridging finance industry as a whole.

The trend towards bridging for financing property refurbishment drew particular attention.

Popular route

Enness Commercial senior broker Chris Whitney (pictured) noted that this was a popular route to avoid hefty stamp duty costs and stagnation in the London property market.

“Many more clients have been buying cheaper or outdated properties and using second charge bridging finance to update them before refinancing onto a residential product,” he said.

“Likewise, we’ve seen numerous clients look to raise money against their properties who do not want to refinance altogether. As such, they’re using regulated bridges as second charges against their property, in order to keep their attractive first charge mortgage while securing the extra funds they need.”

Brightstar director of short term lending and development Kit Thompson echoed this, adding: “Our business has seen a large increase in bridging for property refurbishment, with an increase in Permitted Development Right (PDR) schemes and change of use projects.

“Almost all of our non-regulated bridging loans here at Brightstar involved some element of refurbishment, whether just light refurbs or those projects involving change of use and planning consent.”

Thompson noted, however, that regulated bridging deals Brightstar conducted rarely involved refurbishment.

Trends to watch

MTF director Joshua Elash added the data showed bridging finance was increasingly a mainstream financial solution.

“It is interesting to note what appears to be a direct correlation between the data reported and the macro-economic and regulatory changes which have impacted upon the market.

“We have, for example, in this annual reporting cycle, seen regulated bridging finance lending outstrip unregulated bridging finance for the first time. This follows on from the implementation of the mortgage credit directive and the consequential introduction of a new class of regulated consumer buy to let lending.

“Equally we are interested to note that again for the first time since reporting began, refurbishment to existing investment property was the most popular reason for borrowing during Q2 of last year.

“As we look ahead to the year 2018 we are interested to see how these two trends in particular pan out,” he added.

Source: Mortgage Solutions

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Bridging Loans – A source of quick capital

Sometimes, it can be difficult to get a regular loan, especially if you need capital fast. Traditional lenders and financial institutions have a lot of red tape involved in a loan process. Bridging loan cuts away the bottleneck and significantly reduces the time it takes to get much needed financing.

Bridging loan allows you to take advantage of opportunities without having to face the tedious loan application process adopted by most lenders.

In essence, bridging loan provides a way of obtaining short term financing for your project while working towards a more long term alternative. Bridging loans are invaluable especially when you need to purchase a property or equipment that would otherwise not be possible.

Even though bridging loans are commonly used to purchase property, this short term interest only loan can provide a breathing space for you to handle other projects while exploring other sources of funding.

Here are just a few reasons to use bridging loans

Short processing period

Property investors know that delay means losing out. As much as you wish it were possible, a property in the market won’t wait for you to raise the needed funds. There are lots of other investors with access to quick cash who will grab the property from under your nose. With bridging loan, you don’t have to wait for your mortgage to be approved while watching helplessly as a wealthy investor snaps up your dream property. Instead you can immediately raise the money for your new property and worry about selling off the old one later.

Even if you are not in the market for a property, you may need to acquire equipment for your business, or raise capital for raw materials. Bridging loan provides a short term solution for you to raise the needed cash to solve your business needs.

Bad credit financing

A lot of people are in a situation where they find it hard to obtain financing due to a poor credit score. Virtually every major lender will check your credit score before approving you for a loan. Simply missing one payment can plunge your credit score into the pits and even if you manage to result the bad credit issues, the bad record can still come back to haunt you. Thankfully, bridging loan offers a way for people with bad credit score to access the funding they need.

“One of the benefits of bridging loan is that bad credit will not be a barrier. These loans are quick to arrange, can be used for a variety of purposes and involves little or no credit check” says James of Bridging Loans UK.

Bad credit financing is typically used to clear a mortgage or buy a property while a mortgage plan is being worked out, or resolve other financial situations. However, you should have a clear exit strategy in mind before opting for bad credit financing.

Covering tax liabilities

Sometimes, you can be faced with sudden tax liabilities that can be difficult to factor into your current cash flow. In situations like this, you may find it hard to meet your financial obligations before the due date and this can cause unnecessary hardship for you or your business. Whether you are an individual or you run a business, unexpected tax can a hassle.

Bridging loan makes it easy for you to access the necessary funds to meet your tax bill. You receive short term financing to meet your financial obligations so that you can have the peace of mind to focus on other productive aspects of your life.

Debt forgiveness

If you have a property that is due to be repossessed due to inability to meet your financial obligations, a bridging loan can be used to pay off part of the debt and prevent repossession. It can also be used to pay off current lenders so that you will have a bit more time to resolve your situation. If you can stop the property from being repossessed, you retain control and can avoid a forced sale situation.

Bridging loan comes with a variety of repayment plans and manageable interest rates that would not affect the lifestyle of the borrower. It provides a useful source of quick cash that can help you meet any financial obligation in a timely manner. However, you have to be certain you can meet the loan conditions; this means planning your exit strategy, which could include conventional mortgage, buy to let or selling the property outright.

Source: ABC Money

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Bridging lending rises 10.7% in 2017

Bridging loan volumes rose 10.7% to £534.1m in 2017, according to the latest Bridging Trends data from mtf, Brightstar Financial, Enness, Positive Lending and SPF Short Term Finance.

£118.79m of bridging loans were completed by Bridging Trends contributors in the first quarter, before soaring to £150.7m in the second quarter – the highest level of loans transacted by contributors in a single quarter since Bridging Trends launched in 2015.

Volume cooled slightly in the second half of the year, dropping to £142.75m in Q3 and to £122.49m in Q4.

Regulated bridging loans increased market share on previous years to an average of 46% in 2017, compared to 44% in 2016 and 36.6% in 2015. Regulated bridging loan activity outperformed unregulated bridging loans for the first time in the first quarter of 2017.

Average loan-to-value levels dropped to 46.6% in 2017, down from 49% in 2016, while average monthly interest rates remained consistent throughout the year at 0.83%, dropping slightly from 0.85% in 2016 and 0.91% in 2015.

Average loan terms remained consistent in 2017 at 12 months- up from 11 months in 2016. Average completion times averaged 43 days in 2017, down from 45 days in 2016.

Mortgage delays were again the most popular reason for clients taking out a bridging loan in 2017- at 29% of all lending, although this was a reduction from 2016 when they accounted for 34% of activity.

Joshua Elash, director of mtf, commented: “The continued growth in lending volume in this sector, as reflected by the data reported by the contributing parties over the year, evidences the extent to which bridging finance is now increasingly a mainstream financial solution.

“It is interesting to note the what appears to be a direct correlation between the data reported and the macro-economic and regulatory changes which have impacted upon the market. We have, for example, in this annual reporting cycle, seen regulated bridging finance lending outstrip unregulated bridging finance for the first time. This follows on from the implementation of the mortgage credit directive and the consequential introduction of a new class of regulated “consumer” buy to let lending.

“Equally we are interested to note that again for the first time since reporting began, refurbishment to existing investment property was the most popular reason for borrowing during Q2 of last year. This follows on from increases in the stamp duty taxes payable on the acquisition of new buy-to-let properties and indicates a potential strategy shift amongst professional property investors towards value enhancement.

“As we look ahead to the year 2018 we are interested to see how these two trends in particular pan out.  In the interim and what remains certain is that bridging finance as a financial solution continues to go from strength to strength.”

Chris Whitney, Senior Broker at Enness Commercial, said: “Between stamp duty costs and stagnation in the London property market, it’s no wonder bridging finance for refurbishment is becoming increasingly popular. To avoid heft stamp duty charges, many more clients have been buying cheaper or outdated properties, and using second charge bridging finance to update them before refinancing onto a residential product. Likewise, we’ve seen numerous client looks to raise money against their properties who do not want to refinance altogether. As such, they’re using regulated bridges as second charges against their property, in order to keep their attractive first charge mortgage whilst securing the extra funds they need.

“Encouraging to see an overall increase in the total amount of bridging originated by the contributors to Bridging Trends, indicating a strong and resilient bridging sector that can survive what was a tough year with numerous obstacles to overcome, including MCD, PRA and tax changes for BTL/second properties and not least the long-drawn out Brexit negotiations.”

Kit Thompson, Director of Short Term Lending & Development at Brightstar, added: “Our business has seen a large increase in bridging for property refurbishment, with an increase in PDR schemes and change of use projects. In fact, with the exception of our FCA regulated bridging, which by contrast doesn’t generally involve refurbishment, almost all of our non-regulated bridging loans here at Brightstar involved some element of refurbishment, whether just light refurbs or those projects involving change of use and planning consent.”

Source: Financial Reporter