Bridging completions
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Bridging completions rise by nearly 30%

Annual bridging completions are now close to £3.8bn after rising by 29.9% from Q4 2017 to Q1 2018, data from the Association of Short Term Lenders has found.

The value of loans written in the first quarter of 2018 increased by 32.5% compared to the same quarter last year.

Payam Azadi, director at Niche Advice, said: “It shows bridging is here to stay, is growing and will just continue to grow.

“Any brokers not within the sector should certainly be looking at it more closely and aligning themselves with experts within that market. A good place to start is speaking to some of the packagers and master brokers experts.”

Total loan books are continuing to climb, with a rise of 13.1% compared to Q4 2017. Compared to the end of Q1 2017, the value of loan books rose by 35.6%, to £4.2bn.

Benson Hersch, chief executive of the ASTL, said: “Our figures highlight the fact that the bridging finance industry is in good shape and is ready and willing to meet the challenges and opportunities of today’s market.

“The bridging sector is now a well-established part of the property finance market and, barring any black swans, should continue to grow.”

The pace of increases in applications reversed recent declines and increased by 28.9% compared to a decrease of 11% in Q4 2017. On an annual basis, applications are up by 23.2%, making up a total of £19.7bn.

Although applications do tend to be unreliable indicators and are dependent on how many lenders are offered the same deals, this is still a staggeringly large figure.

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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Thinking creatively when it comes to financing your next property purchase

Even amidst rumours of its demise, it is undeniable that the UK’s real estate sector is hugely attractive among both international and domestic investors.

Thanks to increasing prices and health yields, commercial and residential properties have remained popular ventures for those seeking safe and secure assets able to withstand sudden and volatile market shocks.

According to recent figures, strong market demand has pushed the average price of a UK home to £225,000, and property forecasters anticipate incremental increases over the coming 12 months despite a potential interest rate hike and uncertainty surrounding Brexit.

The competitive nature of the UK real estate market has, however, made it more challenging for prospective homebuyers seeking to move onto or up the property ladder.

Limited supply and rising demand have led to a rise in the number of property chains, in turn increasing the time it takes to complete a purchase and thereby meaning there is a greater risk of the deal falling through.

More and more deals are falling through

In Q1 2018, the number of house sales falling through before completion had reached 38.8% – this is up from 34.9% a year earlier and the highest recorded figure in over a decade.

Of these failed purchases, nearly half (46%) were due to a buyer changing their mind, or the seller becoming frustrated by the time it was taking to negotiate and exchange keys.

Understandably, the delays typically encountered when stuck in a property chain has become a source of frustration for prospective buyers, with the added repercussion that a collapsed chain can lead to thousands of pounds worth of solicitor, conveyancing and broker fees which ultimately amass to nothing.

With delayed chains affecting more buyers and sellers, there is a clear need for people to think more creatively when it comes to buying a property.

From the outset, a strategy is needed which takes into account the different scenarios that could arise, including a broken chain.

Indeed, people must consider unforeseen time delays ranging from the initial negotiation period right through to the days leading up to the completion of sale.

Moreover, it goes without saying that having access to the finance needed to commit to a purchase is of utmost importance.

The mortgage application and approval process can be time-consuming, made more complicated by the stringent lending measures that have been introduced in recent years.

Having a mortgage agreed in principle prior to a purchase is of course standard practice, but the ensuing background checks, mortgage affordability interviews or changes in earning as the property negotiations develop can lead to significant delays down the line.

As such, it is important that property buyers – particularly the more seasoned property investor who is far more active in this market – have a firm grasp of the options available to them if a mortgage is not viable.

Keeping your options open

Moving beyond the traditional finance instruments available to borrowers, alternative finance solutions such as specialist bridging loans can be ideally suited for those stuck in a chain.

Bridging loans are by their very nature a flexible and versatile solution, ensuring the rapid release of capital by using an existing property asset as a security.

The specific application varies according to the financial circumstances of each buyer, but in most cases, bridging loans ensure a buyer can purchase a property if there are delays in receiving the funds from a sale of an existing property or because another lender is unable to act quickly enough.

This type of creative thinking and willingness to look beyond traditional finance solutions has significant potential for those at risk of being stuck in chain.

Having access to capital places any buyer in a position of strength – it helps negotiations move more quickly and in turn reduces the risk of buyers getting locked in complicated chains or there being delays that result in a deal falling through.

Bridging loans will not be suitable for everyone, of course. Nevertheless, it remains important for those who are active in the UK’s property market to know the options available to them and understand how they can avoid some of the problems that are causing an increasing number of real estate deals to break down.

Source: Mortgage Introducer

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Two-thirds of brokers report bridging rise

65% of brokers saw an increase in bridging loan volume in the third quarter of 2017, a rise on 48% in the second quarter, according to the latest Broker Sentiment Survey from bridging lender, mtf.

The geographical spread of bridging loan demand also broadened in the third quarter and for the first time 9% of the 96 brokers surveyed cited an increase in demand in Scotland and Northern Ireland, respectively.

For the fourth consecutive quarter, the South East saw the biggest demand for bridging loans in the UK at 48%, although this represented a drop from 62% in Q2. The second highest area of demand was London, at 25%.

Also for the fourth consecutive quarter, funding development projects was the most popular reason for taking out a bridging loan at 30%, followed by business purposes at 17%.

However, some 69% of brokers said the bridging loan process took longer than it was 12 months ago. While 45% said it took under three weeks to complete a bridging loan, and 18% cited a mere one to two weeks, some 55% said it took in excess of three weeks.

34% suggested three to four weeks was the average length to complete a bridging loan, while 21% indicated that bridging loan cases generally took more than four weeks to complete.

Almost three-quarters of brokers surveyed blamed solicitors as the main reason for delay, followed by the valuer at 13%.

James Anderson, head of new business at mtf, said: “Bridging loans remain an important financial tool for borrowers and demand continues to grow.

“Speed has always been a vital element in bridging finance and it is important that solicitors understand what is required, so that bridging finance requests can be completed as quickly and accurately as possible.

“There are some excellent firms of solicitors to choose from and many bridging loan lenders, like mtf, use a panel of pre-approved firms to help speed up a bridging loan transaction for the applicant.

“At mtf, we take a fast, non-status based approach to lending going back to the traditional roots of bridging finance. Our approach is streamlined; no application forms, no upfront fees, offers in principal within 12 hours of enquiry and valuations within 48 hours.”

Source: Best Advice

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Bridging loan volume soars in Q1

Bridging lending reached £154.02m in Q1 2018, up almost a third compared to £118.79m for the same period last year, Bridging Trends data found.

This is the highest volume recorded since Bridging Trends launched in 2015, almost doubling £80.47m of lending during Q1 2015. Prior to Q1 2018, volume peaked at £150.07m during the second quarter of 2017.

Alan Dring, consultant at Hope Capital, said: “It’s a healthy trend that’s continuing, is good to hear and is encouraging for rest of the year. The first quarter was frustrated by bad weather but the confidence is still there and these figures are a good relfection of a confident, active sector.

“However service levels for bigger lenders are being jeopardised by appetites for more business at higher LTVs and lower rates, chasing the market and not necessarily quality and as a consequence these figures could be influenced by poor service levels.

“These figures don’t surprise me, they encourage me. Hopes’s figures in second quarter will be better than first which was our record.

“They’re gaining opportunity on the back of diminishing service levels of larger lenders who could be accused of getting greedy in a market steadily increasing. There’s every reason to be optimistic if you get your model right.

“The figures are also down to education with brokers becoming more knowledgable and aware of opportunities.”

The average term of a bridging loan was 11 months during the second quarter, down from 12 months in the previous quarter.

For the third consecutive quarter, mortgage delays were the most popular reason for obtaining a bridging loan, accounting for 24% of all lending.

For the first time, auction purchases were the second most popular reason for getting a bridging loan at 20% – up from 4% during the same quarter last year, as an increasing number of people benefitted from fast access to capital.

Refurbishment was the third most popular reason for obtaining a bridging loan during the first quarter at 18%.

A completion time of 48 days during Q1 2018 was lower than an average completion time of 50 days during Q1 2017.

The average term of a bridging loan was 11 months during the second quarter, down from 12 months in the previous quarter.

Average monthly interest rates remained at 0.83% for the second consecutive quarter and were 0.83% during the same quarter in 2017. Average LTV levels increased to 49.1% in Q1 2018, from 46.2% during the Q1 2017.

Regulated bridging loans increased for the first time since Q1 2017, with the number of regulated loans conducted by contributors increasing to 43.7% in Q1 2018, compared to 42.6% during Q4 2017.

First legal charge lending increased to 83.7% of all loans during Q1 2018, up from 80.3% in the fourth quarter. Meanwhile, second charge loans increased to 16.3% compared to 13.4% during Q1 2017.

Joshua Elash, director of bridging finance lender, mtf, said: “It is particularly interesting that pricing has remained stable, despite an increase in regulated lending. This suggests that the recent downward pressure on rates might be easing and in the unregulated space, going the opposite way.

“Also, particularly interesting is the increase in bridging loans for auction purchases, considering the otherwise quiet property market, where transactional volumes have been adversely impacted by recent changes to buy-to-let income tax treatment and exorbitant increases in stamp duty.”

Tomer Aboody, director of bridging finance lender mtf, said: “Bridging volume has peaked to its highest level as the product becomes an increasingly mainstream financial tool.

“This is good news for borrowers that are able to access fast and vast pools of capital to fulfil their short-term funding needs as well as a growing number of investors attracted to the space.”

Source: Mortgage Introducer

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Will the bridging boom continue?

House price growth is slowing in many areas across the UK and many developers and investors are choosing to boost the value of their property portfolios by carrying out repairs and refurbishments. As a result, we are seeing a boom in bridging finance, but will this continue and what does the future bridging landscape look like?

With Brexit looming large on the horizon, we recognise that there may be challenges ahead due to ongoing economic and political uncertainty. However, from our perspective, we are confident that the bridging market will continue to flourish. Indeed, this confidence is reflected by research from the Association of Short Term Lenders, which found that 78% of its members expect their business to grow, with almost all (93%) identifying the provision of short-term finance to SME housebuilders as a growth area.

We remain optimistic in the bridging sector in both the short and longer term. According to our SME Growth Watch research, the number of SMEs in the construction of domestic building sector has grown by 38% in the past five years, while the number of smaller firms in the renting and operating real estate sector – which includes buy-to-let – has risen by 16% over the same time period. This is positive news for the future of bridging as – with mortgages approvals taking longer – we believe developers and investors will increasingly look to short-term finance solutions to make the most of opportunities as they arise.

Regulatory changes are also set to lead to increased demand for bridging finance. From 1st April, government guidelines stipulate that “landlords of privately rented domestic and non-domestic property in England or Wales must ensure that their properties reach at least an energy performance certificate (EPC) rating of E before granting a new tenancy to new or existing tenants”. Properties that do not comply with these standards could require renovations and improvements and this is where bridging can help, enabling landlords and investors to get access to finance and make changes relatively quickly. The new EPC regulations will be rolled out to non-domestic properties from 1st April 2023, again providing another opportunity for the sector.

With house price growth slowing and regulatory and tax changes impacting margins in the buy-to-let sector, in particular, developers and investors are adding value to their properties by carrying out improvements. While there are a number of finance options available to carry out work of this kind, bridging is an attractive option for many, with lenders in this sector, including ourselves, providing levels of flexibility and speed of service that cannot be replicated by the high street banks. We believe the future of bridging will continue to be bright.

Source: Bridging and Commercial