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Bridging sector breaks £5bn

Gross annual bridging lending broke £5bn by the end of 2017, the West One Bridging Index found.

ASTL members lent over £1bn in the quarter during which the Bank of England implemented the 0.25% rise in their base rate.

Payam Azadi, director at Niche Advice, said: “I’m surprised. That figure is quite large and I didn’t expect it but it makes sense why so many lenders are looking to get involved in bridging.”

Alan Dring, consultant at Hope Capital, agreed and added the results were very encouraging.

He said: “I was surprised. You’ve got to be encouraged because that’s the way contributors to the data are seeing the market.

“The data in the bridging sector is often questionable. Its showing the trend is upwards and that has got to reinforce the fact the market is continuing to be vibrant.

“Hope had its best first quarter this year so it’s reflected upon ASTL members I think. It’s just a good indidcator that people’s confidence remains in the sector. There’s more solicitors trying to get into bridging and people trying to acquire the specialisms to generate a lot in this market.”

However Benson Hersch, chief executive of the Association of Short Term Lenders (ASTL), thought the huge figure wasn’t unexpected.

He said: “The figure of £5bn for bridging lending does not surprise me.  Indeed, the total may well be more, given that there are lenders which operate ‘under the radar’ as it were. The bridging sector grows from strength to strength and, barring unexpected setbacks, 2018 should be even better.”

The higher volume of smaller-sized transactions that characterised the latter part of 2017 has continued through to the end of the year, as property investors look regionally for their returns.

Higher volumes of smaller transaction sizes have persisted throughout the second half of 2017. Average loan sizes remained between £600,000 and £800,000 in the quarter and confirming a longer-run average trending to below £800,000.

Transaction volumes continue to be strong, however, resulting in total lending surging in Q4 2017.

Marie Grundy, sales director of West One, said: “In 2017, bridging has turned out to be a ray of sunshine in the property finance world, with a series of record performances throughout the year.

“The industry shrugged off the headwinds buffeting other parts of the industry, to deliver a final lending total of £5bn for the year. At West One, our short-term lending grew with similar strength to a book of around £450m and record volumes of transactions in the year.

“What’s perhaps most encouraging is to see a breakthrough in the diversity of that growth, with more and more opportunities being found regionally.

“Where I am, in the North West of England, places like Greater Manchester and Merseyside are increasingly vibrant cities that are benefitting from urban regeneration and moves away from London, like the BBC made a few years ago.

“That means that these, along with Birmingham and the East Midlands that are extended commutes from London, are attractive places to live. Opportunistic investors looking for better returns are finding them here, and bridging is well placed to help them capitalise on those.

“Looking ahead, we remain confident in further growth of the bridging market not only through further regional expansion, but also as SME developers seek small project funding for housebuilding, to meet the government’s new home targets.

“With many finding it hard to get funding for projects under £1m, or to finance property acquisition whilst planning permission is being obtained, bridging is well-placed to support them.”

Greater buoyancy in property markets outside London and the South East are offering property investors better rental yields and  some opportunities for capital appreciation despite the capital city offering neither.

Danny Waters, chief executive of Enra Group, said: “The bridging sector has performed excellently in 2017, despite the backdrop of concern around the progress of Brexit negotiations, sluggish economic indicators and interest rate rises.

“Whilst a few lenders have notably taken 2017 as the time to exit bridging, we are generally seeing more competition in the sector, which both drives innovation and keeps pricing attractive for customers.

“That continuing adaptation to conditions and to borrowers’ needs has been a key strength for the sector in the decade since the financial crisis.”

Source: Mortgage Introducer

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Bridging loan volume rises in Q1

Bridging loan volume rose by almost a third in the first quarter of 2018 as demand for short term finance remained strong, the latest Broker Sentiment Survey by lender mtf found.

Some 30% of the 119 brokers asked, experienced a rise in bridging loan volume, with the biggest demand coming from the South East at 50%, up from 47% in the last quarter of 2017. About 37% of brokers cited competition as a key issue facing the bridging finance sector during the first quarter of 2018.

Alan Dring, consultant at Hope Capital, said: “Business for my clients certainly rose in the first quarter which was very encouraging and I think competition stimulates that growth because there were significant changes on rates and LTVs and that is a reflection of a competitive market.

“This time of the year gets more exciting and the potential for continued growth is certainly there although the bad weather conditions in the first quarter would have caused delays to some developments.

The key issue is always the service levels that competition brings. I said competition would be biggest influence in 2017 and I think it was. It won’t go away in a robust market.

“The biggest aspects for 2018 wont’ be competition but will be education, collaboration and communication. They need to be appreciated by all the stakeholders.

“Competition is always good but whether you grow is down to how could your relationship is with your stakeholders and the opportunities they bring.”

Demand for alternative finance and an influx of cash into the space given the comparative attractive yields on offer has prompted new borrowers, investors, lenders and brokers to the market. This has facilitated its growth and continued acceptance into the mainstream as a viable financial tool.

Interest rates and pricing emerged as most important when choosing a bridging finance lender at 39%, while 33% of respondents said flexibility was a key issue. Some 26% cited speed of completion as paramount. A mere 2% said an existing relationship with a lender was the most important factor.

James Anderson, head of new business at mtf, said: “The feedback from brokers points to a strong need for specialist lending. Bridging finance is increasingly being used as a viable financial tool to provide real time funding to plug any gap before longer term finance can be put in place.”

Some 42% of brokers would like to see higher loan-to-values on offer in the bridging finance sector, while 27% of brokers want greater flexibility on commercial lending and 26% want faster turnaround times. None of the brokers felt the need for lower rates or further transparency.

The most popular reason for taking out a bridging loan in the first quarter was to fund a development project at 27%, up from 19% in the fourth quarter of 2017.

The purchase of an investment property was the second most popular reason at 24%, followed by refurbishment at 21%.

Source: Mortgage Introducer

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Bridging lenders are positive about the future

ASTL found the majority (78%) of members expect their business turnover to grow, with two thirds (63%) expecting the same of the bridging finance sector as a whole. Members are also very positive about the prospects of providing short term finance to SME housebuilders, with 93% believing this is a growth area.

However, members are slightly less optimistic about the long-term future prospects of the UK economy, with positivity decreasing from 50% in December 2017 to 43% this month. Just over half (52%) of members are unsure, and 11% feel negatively about the economy. This is likely due to the protracted nature of the Brexit negotiations combined with the rise in inflation, which in turn is likely to lead to higher interest rates.

ASTL members are split about the direction of property prices, with 52% expecting slight growth and 48% expecting prices to fall. They are lukewarm about the potential impact of the Spring Statement, with 48% neutral and 19% negative.

ASTL CEO Benson Hersch said: “Whilst I remain cautious about future prospects for the UK in a very uncertain world, in which the economic climate can change overnight, members are confident that they will continue to prosper. The use of bridging as a financial tool, both for property transactions and for other business purposes is now well-established.”

Source: Mortgage Finance Gazette

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Bridging finance regarded as well established in British mortgage market

Bridging lenders in the UK are positive about the future with the majority expecting this sector of the mortgage industry to grow, according to a new sentiment survey.

The upbeat outlook from members of the Association of Short Term Lenders (ASTL) suggests that the use of bridging loans as a financial tool for property transactions is well established.

Some 78% of members expect their business turnover to grow and 63% are expecting the same of the bridging finance sector as a whole. In addition, they are very positive about the prospects of providing short term finance to SME house builders with 93% believing that this is a growth area.

However, members are slightly less sanguine about the long term future prospects of the UK economy, positivity has decreased from 50% in December 2017 to 43%. No less than 52% are unsure and only 11% are negative.

The survey report says that this is likely due to the protracted nature of the Brexit negotiations combined with the rise in inflation which in turn is likely to lead to higher interest rates.

Members are split about the direction of property prices, with 52% expecting slight growth and 48% expecting prices to fall. They are lukewarm about the potential impact of the Spring Statement, with 48% neutral and 19% negative.

‘Whilst I remain cautious about future prospects for the UK in a very uncertain world, in which the economic climate can change overnight, members are confident that they will continue to prosper,’ said Benson Hersch, ASTL chief executive officer.

‘The use of bridging as a financial tool, both for property transactions and for other business purposes is now well-established,’ he added.

Source: Property Wire