Bridging lending has fallen slightly during the first quarter of the year but strong competition and signs of average loan size increases indicate a market which is on an ‘upward trajectory’.
That’s according to the latest figures from West One which has released its Bridging Index showing gross annual bridging lending reached £5.5 billion in Q1 2019.
This was a slight decrease of 2.6% on the previous quarter, which yielded a high of £5.7 billion. But West One said it was always going to be challenging to maintain this powerful growth trajectory.
What’s more, according to its estimates, the average loan size increased by 11% through the quarter, compared to Q4 2018, which was the highest performing quarter of last year.
Trends: ‘Bridge-to-let’
As well as releasing lending figures, the West One Bridging Index also analysed trends within the market. It said competition had been maintained thanks, in part, to the wealth of new bridging products to enter the market.
New ‘development exit’ loans to help builders transition from repaying their development facility to obtain the sales values they want to achieve have been created.
But West One said it had also noticed increasing demand for ‘bridge-to-let’ products, which enable landlords hit by tax relief changes and affordability stress tests to bring derelict properties up to scratch to add to their portfolios.
Interest rates
West One’s data also revealed bridging finance interest rates had fallen to their lowest levels, with a Q1 average of 0.95% per month.
Factors contributing to this included a stable Bank of England base rate, strong market competition and the continued interest from new entrants combined with well-funded players maintaining attractive rates.
West One said the fall in rates was also driven by the increase in regulated bridging that was priced at a lower rate of interest. This, it explained, had meant good value for borrowers, resulting in the continuing interest and performance of the sector.
Stephen Wasserman, managing director, West One Loans: “At West One, we’ve seen robust growth in our bridging service this year, which includes completing one of our largest loans.
He added: “It is positive to see the average loan size increase, too. With the ASTL reporting a record number of applications among their membership, it’s clear that bridging finance is still very much on an upward trajectory.”
By Kate Saines
Source: Mortgage Finance Gazette