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Bridging volumes rise in ‘buoyant’ short term loan market

There has been a 46% increase in gross bridging loan volumes in Q3 2020, as the sector recovers from the Covid-19 lockdown.

According to the latest Bridging Trends reports regulated transactions continued to dominate the sector while the average interest rate fell in line with pre-Covid-19 levels.

There was also a rise in demand for regulated refinance, according to the quarterly report produced by short-term finance lender, MT Finance.

The report revealed contributor lending transactions totalled £115.52 million in the third quarter of 2020.

Although lending figures were 35% below the pre Covid-19 levels of £180.94 million, they had risen significantly (46%) from the £79.4 million of bridging loans transacted in the previous quarter. This highlighted the impact of Covid-19 restrictions being eased.

MT Finance’s report showed regulated bridging lending continued to dominate the sector in Q3 at an average of 53% of all lending, compared to 47% of unregulated transactions.

It said the average weighted monthly interest rate in Q3 decreased to 0.78% from 0.85% in Q2. This fell back in line with rates offered before the Covid-19 outbreak (0.75%).

Meanwhile, average LTV levels in the third quarter increased to 51.7%, from 48.8% in Q2. This was likely attributed to borrowers turning to bridging finance as mainstream lenders continued to tighten their maximum LTV restrictions.

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Demand for second charge lending dropped significantly, accounting for an average of 17.7% of total market volume in Q3 – down from 26.1% in Q2.

For the eighth consecutive quarter, the average term of a bridging loan remained at 12 months while typical completion time increased from 50 to 52. This could be attributed to operational capacity issues, the report said.

The most popular use of a bridging loan remained the same as the previous six reports – to purchase investment property.

Gareth Lewis, commercial director at MT Finance, said: “The stamp duty holiday and rising house prices has ensured that the market remains busy and it has been well publicised that the mortgage market is currently feeling the strain when it comes to delivering acceptable processing turnaround times, which can add to an already stressful experience.

“Luckily, bridging finance is a useful tool for brokers to help unlock a transaction for a client allowing them to meet deadlines.

“Given the stress on a chain, presented by the slow processing times, it is unsurprising to see more clients turning to regulated bridging finance to support their purchases.”

Craig Hardiman-Scott, senior associate at Sirius Property Finance, said: “Customer demand is extremely high, so it comes as no surprise that the short-term loan market continues to be very buoyant from developer exits through to business capital injections to name but a few.

“Those with competitive rates, products, and service that have been able to adapt their offerings throughout the pandemic are well placed to continue seeing the benefits.”

By Kate Saines

Source: Mortgage Finance Gazette

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ASTL: Bridging market is open for business

The bridging market is still open for business but communication is key to help customers identify the best options for their borrowing situation, according to the Association of Short Term Lenders (ASTL).

Vic Jannels (pictured), CEO of the ASTL, said: “It’s at times like these when the resilience and innovation of the short-term lending sector comes to the fore.

“We have seen lenders introducing new technology and processes to ensure they are able to continue to deliver vital funds for customers, and even received new membership enquiries for the ASTL.

“At the same time, lenders have been working proactively to engage with their existing customers to identify the most appropriate course of action for their circumstances.

“There will certainly be some customers who are experiencing financial distress as a result of the COVID-19 crisis, and our immediate guidance for these customers is to speak to their lender as soon as possible, so that you can work together towards a solution.

“Notwithstanding the above, it is important for all borrowing customers to remember that they have a contractual responsibility in relation to the interest payments due, subject to the terms of the loan, and to redeem their loans at the appropriate time.

“Lenders will always be willing to have a conversation with their customers and look to be supportive whenever possible. The current pandemic, however, is no reason to simply ignore your obligations and stop making payments or refuse to communicate with your lender.

“Bridging lenders work tirelessly to engage with customers in genuine difficulty but they, in turn, have their investors and funders to consider and, in turn, do not want to be in breach of their commitments.

“So, our guidance for all customers is to talk immediately to your lender if you are experiencing financial distress. There are often sensible options and ways forward, but these can only be identified by working together.”

By Ryan Fowler

Source: Mortgage Introducer

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Bridging lending up by nearly 20% in 2019

Bridging loan books grew to £4.5 billion in 2019, an increase of 19.7% compared to 2018, according to figures compiled by auditors from data provided by members of the Association of Short-Term Lenders (ASTL).

Completions in Q4 2019 reached £1.068 billion – an increase of 13.7% on Q3, while average LTVs continued to remain below 60%.

However, applications in the final quarter of 2019 fell by 10.7% on the record-breaking previous quarter.

The value of loans in default grew by 13.2% in Q4 2019 from the previous quarter.

Vic Jannels, CEO of the ASTL, commented: “The value of outstanding bridging loan books jumped significantly last year driven by both an increase in new business and a trend for borrowers to take bridging finance over longer terms.

“We did see a fall in applications in the final quarter of 2019 compared to the record breaking Q3, but in the context of both a December General Election and Christmas, this is perhaps unsurprising.

“There is, however, reason to be cautious. The value of loans in default has continued to rise, and there is some evidence that repossessions are also increasing, so it is important that lenders maintain responsible underwriting and collections practices alongside their appetite to continue to grow their lending.”

By Joanne Atkin

Source: Mortgage Finance Gazette

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Six Ways To Use A Bridging Loan

A bridging loan can essentially be used for any legal purpose, however, they are usually used as part of a property transaction. As the name suggests, bridging finance is used to ‘bridge’ a gap in a person’s finances before an alternative source of funds becomes available, or before a longer-term finance option can be arranged.

Using an online bridging loan calculator is the best way to understand if your project is viable and what it would cost you if you were to take out bridging finance.

This article outlines the most common uses of a bridging loan, as well as some of its benefits.

Buy before you sell

The most common way a bridging loan is used by homeowners is to purchase their next home before selling their current one. This could be because their buyer pulled out last minute and they don’t want the property chain to break, or simply because their perfect home has come onto the market and they don’t want to miss it.

The bridging loan would be secured on your current property and used to purchase the new one. The bridging loan would then be repaid from the proceeds of the current property being sold later. As the maximum term for a bridging loan is usually 12, or 18 months, this will give you ample time to sell your property, even if it isn’t on the market when you take out the loan.

Buying a property at auction

Bridging loans are ideal for purchasing properties through an auction. Once a successful bid is made at an auction, the buyer has 28 days to complete the purchase which obtaining a mortgage within that timescale may be impossible.

As bridging finance can be arranged very quickly, as little as 48 hours in some circumstances, the loan can be used to purchase the property outright (sometimes with no deposit if you have other properties which can be used as additional security). The most common method of repayment in these circumstances is through re-financing (when you have arranged a mortgage, the money will be used to repay the bridging lender). Bridging finance can also be used if your intention is to purchase the property to renovate and sell on for a profit.

Renovate your home before selling

If you are planning to sell your home, but some renovations would significantly increase the value, bridging finance can be used to fund this.

The bridging loan would be secured on the property and then repaid through the proceeds when the property is sold.

Purchasing an unmortgageable property

Banks and building societies will deem some properties as ‘unmortgageable’ which means the property is unsuitable for mortgage lending. This could be for a variety of different reasons, but common reasons include the lack of a working kitchen/bathroom, it is above a commercial property or the lease is too short.

In these situations, the property is limited to cash buyers as those requiring a mortgage to purchase the property wouldn’t be able to do so. However, as a bridging loan can be secured on any type of property, one can be used to purchase the property and fund any repair works required to make the property mortgageable. The bridging loan would be repaid through re-financing when the mortgage is granted.

Inheritance tax and probate issues

Sometimes, when dealing with inheritance tax and other probate issues, large funds are required. This could be for paying tax and other bills, releasing charges on a property or even to pay off other beneficiaries. In these situations, property is usually sold to produce the lump sum required, however, there is often a time limit put on the sale and properties may be put into a forced sale position, an auction for example, meaning it’s likely that the best price won’t be achieved.

A bridging loan can be used to sort out any problems, provided there is a property for it to be secured against, and then repaid when the property is sold.

Repossession prevention

If a property of yours is due to be repossessed by a lender, a bridging loan could be used to pay off any debts secured against it, provided you have enough equity in this property, or another, for the loan to be secured against. This will enable you to regain control of the property and sell it on your own terms to be able to repay the loan, and avoid a forced sale situation where the property is unlikely to achieve its full value.

Benefits of using a bridging loan

There are multiple benefits to using bridging finance, some of which are listed below.

  • Fast to arrange — in some circumstances, the funds could be in your account within 48 hours. This is ideal for emergency situations, or times when you want to grab an opportunity.
  • No monthly repayments — with a bridging loan, the interest is added to the loan facility and repaid at the end of term with the capital, this means no monthly repayments are required.
  • Flexible lending criteria — as no monthly repayments are required, your income will not be assessed and most lenders won’t look at your credit history. As long as you have a viable exit strategy and you have sufficient security available, you should be able to qualify for a bridging loan.
  • Any property can be used as security — a bridging loan can be secured on any type property, including; houses, flats, bungalows, shops, commercial units, mixed-use properties, hotels, farms and also land and building plots. Bridging finance can also be secured on derelict properties, or those of a non-standard construction. You can also use multiple properties as security for one loan to lower the loan to value.

Source: Shout Out UK

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Bridging loan applications up 17%

Bridging loan applications in the third quarter of 2019 were up almost 17% year-on-year standing at £6.1bn.

According to figures compiled by auditors from data provided by members of the Association of Short-Term Lenders (ASTL), year-on-year annual applications hit nearly £23bn while completions remained at more than £4bn.

Q3 completions stood at nearly £940m, a decrease of 2% on the same period last year, although year-on-year completions were up by 1%.

At the end of the third quarter, bridging loan books totalled £4.3bn, a reduction of 6% compared to last quarter, but an increase of more than 5% on the same period last year.

Benson Hersch, CEO of the ASTL, said: “This is another strong set of results for the bridging sector. Applications for loans have increased even more steeply than completions, with a staggering record £6.1 bn figure for Q3 2019.

“This can possibly be ascribed to intermediaries approaching more lenders, or to new lenders getting their part of the pie.

“Whatever the reason, there is no doubt that the sector is in rude health and estimates of total loans written for the year in excess of £6bn seem to be on the money.

“Year-on-year figures from the data survey show annual completions by members currently at more than £4bn, and they are on an upward curve.

“Back in September 2012, total lending was £885m, with the billion mark being reached at the end of the following quarter.

“This is my final set of quarterly figures as CEO of the ASTL, and it gives me a great sense of pleasure and achievement to leave the industry in such a strong position. It is not, however, the time for complacency.

“The wider political and economic environment remains uncertain and the challenge for the industry now is to continue this level of activity whilst maintaining high standards of underwriting and customer focus.”

By Ryan Fowler 

Source: Mortgage Introducer

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Bridging sector in ‘rude health’ according to ASTL

Applications for bridging loans soared in the third quarter of the year rising more steeply than completions, new figures revealed.

Data released today by the Association of Short-Term Lenders (ASTL) showed bridging loan applications increased by 17% when compared to the same quarter last year.

Indeed, year-on-year annual applications hit nearly £23 billion and completions remained at more than £4 billion.

However, it also revealed the value of completions in Quarter Three (Q3) dipped by 2% on the same period last year, to nearly £940 million. Year-on-year completions went up by 1%.

At the end of the third quarter, bridging loan books totalled £4.3bn, a reduction of 6% compared to last quarter, but an increase of more than 5% on the same period last year.

Applications for loans increased even more steeply than completions, with what the ASTL described as a ‘staggering’ record £6.1 billion figure for Q3 2019

Benson Hersch, CEO of the ASTL, described the data as ‘another strong set of results’ for the bridging sector attributing the rise in applications to either intermediaries approaching more lenders, or to new lenders getting their part of the pie.

“Whatever the reason,” he added, “there is no doubt that the sector is in rude health and estimates of total loans written for the year in excess of £6 billion seem to be on the money.

“Year-on-year figures from the data survey show annual completions by members currently at more than £4bn, and they are on an upward curve. Back in September 2012, total lending was £885 million, with the billion mark being reached at the end of the following quarter.”

These quarterly figures will be the last set Hersch will preside over as CEO of the ASTL, having announced his departure, which will be effective in the new year.

He added: “It gives me a great sense of pleasure and achievement to leave the industry in such a strong position.

“It is not, however, the time for complacency. The wider political and economic environment remains uncertain and the challenge for the industry now is to continue this level of activity whilst maintaining high standards of underwriting and customer focus.”

By Kate Saines

Source: Mortgage Finance Gazette

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Bridging lenders feeling confident about prospects for 2020

Bridging lenders are feeling positive about their prospects in 2020 despite the uncertainty created by Brexit and the forthcoming general election.

Nearly three quarters of lenders in this sector expect their business to grow over the next six months – far more than the 59% who were predicting growth in the last survey, conducted in June.

The survey, which quizzed members of the Association of Short Term Lenders (ASTL), was carried out just after the date was confirmed for the general election.

Despite this, more than 75% of those questioned were confident about the long –term prospects for the UK economy. Back in June just 50% shared this sentiment.

Competition and turnover

In the next six months, over half of lenders said they thought the market would grow compared to fewer than a quarter in June.

This also meant they expected modest growth in competition. However, competition from other lenders was no longer seen as the biggest challenge for them – instead it was the slow moving property market which was identified as the main hurdle by 55% of those questioned.

Brexit

The ASTL also revealed the number of lenders who would vote to remain in the European Union if there was a second referendum has changed since the beginning of the year.

Back in January, 75% said they would vote to remain, but now most lenders would choose to leave with Boris Johnson’s deal.

Benson Hersch, CEO at the ASTL, said: “Overall, our members are very positive about prospects for the UK, their own businesses and the bridging sector as a whole.

“Competition is expected to increase slightly in the next six months, but this seems to hold little concern for our members, and the downward slope in positivity has been reversed.

“It is hoped that the general feeling of positivity will turn out to be realistic and we look forward to a great end to 2019 and an even better year ahead in 2020.”

By Kate Saines

Source: Mortgage Finance Gazette

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Investor demand for bridging finance

This has been the case for the first three quarters of the year but in Q3 bridging finance for property development nudged down to 22% from 25% in Q2.

A traditional chain-break was once again the second most popular use for bridging finance, contributing to 20% of all lending in Q3, up from 18% in Q2 2019.

Bridging loans for business purposes fell from 12% to 6% in the third quarter.

The Bridging Trends figures are derived from lender MT Finance and specialist finance brokers Brightstar Financial, Capital B, Clever Lending, Complete FS, Enness, Impact Specialist Finance, Positive Lending, Y3S and UK Property Finance.

Bridging loan growth weakened in the third quarter, with transactions by the contributors to Bridging Trends hitting £181.64 million, down by £3.2 million on the previous quarter.

The number of regulated bridging loans within the report rose to 42% in Q3, up from 37.5% in Q2. There was a lower average monthly interest rate in the third quarter (0.74%), a decrease of 0.05% on the previous quarter.

Demand for second charge loans remained consistent at 18.4% in Q3, with average LTV levels at 53.1%.

For the fourth consecutive quarter, the average term of a bridging loan remained at 12 months. The average completion time on a bridging loan application in the third quarter increased by seven days to 51.

Gareth Lewis, commercial director at MT Finance, said: “Bridging loan activity for the third quarter remained stable, coupled with the most popular uses, is a good indication of strong demand from borrowers seeking to purchase property fast while prices are low, ahead of Brexit’s conclusion.

“It’s quite clear that the uncertainty of Brexit has had its effect on the London property market, with prices dropping significantly in many boroughs. This has prompted many property investors to utilise the speed of bridging loans to act quickly on opportunities.

“With the EU deadline now extended, it would be reasonable that we’ll see the same trends continue throughout the rest of the year.”

Andre Bartlett, director of Capital B Property Finance, commented: “We are still seeing strong demand for regulated loans for chain breaking etc for good clients, at low LTVs. The appetite for lenders for these types of deals remains healthy and rates continue to be consistently low and the competition is still fierce.

“The downside is average completion times for loans is heading in the wrong direction, but that may be due to matters outside of lenders’ hands. I would love to see the average completion time get down to below 40 days.”

Chris Whitney, head of specialist lending at Enness, added: “It is a buyers’ market right now, especially for international buyers who are also taking advantage of the weak pound.

“This, and suppressed prices due to the political uncertainty, means that many international buyers are picking up assets at over 20% lower than they might have been three years ago.”

By Joanne Atkin

Source: Mortgage Finance Gazette

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When Is A Bridging Loan A Better Choice Than A Secured Loan Or Mortgage?

Technically speaking, bridging loans are secured loans in their own right. However, there are basic differences between a bridging loan and conventional secured loans. Bridging loans are used for a shorter period and do not require monthly payments, whereas traditional secured loans do require monthly payments and on average are taken over a much longer term. Term loans are loans requiring monthly payments over a set period or term.

All loans secured against land or property in the UK are classed as ‘mortgages’, a legal agreement between the lender and the borrower where the lender takes a legal charge on the title of the borrower’s security in return for the loan. This basically means that the security cannot be legally sold or refinanced until the secured loan is repaid in full, at which time the lender’s charge is removed from the title register.

Depending on requirements and personal preferences, you may find that either a bridging loan or a traditional secured loan is more suitable for your needs.

Traditional Secured Loans

The most common and conventional type of secured loan is a standard residential mortgage where a borrower uses the loan to help fund the purchase of a property in which they intend to live. In this case, the lender would have a priority or first charge over the property title and payments would be made monthly and over an agreed term until the loan plus generated interest are repaid in full. Once owned and prior to the initial secured loan being repaid, additional borrowing, if needed, can either be arranged via a remortgage or an additional secured loan known as a second charge loan. A second charge loan is also listed on the title register but ranks in importance lower than the first charge loan.

Secured loans are considered minimal risk to lenders as the lender has an insurance policy in the form of a legal charge over the borrower’s property or land assets. If the loan is not repaid in full and on time the lender will then have the option to take possession of the security, which can then be sold to recoup the loan monies owed. Following a repossession, the first charge lender receives payment in full before the second charge lender receives any payment from funds remaining. The borrower remains liable for any shortfall following the sale.

Organising a conventional secured loan can be complex and time-consuming. In the case of a mortgage or similar property loan, it could be several weeks or months before the underwriting process is complete. In addition, you may find yourself subject to extensive credit checks and scrutiny. Even though you are providing security in the form of land or property asset(s), your credit report could still impact your eligibility of obtaining a traditional secured loan or prevent you from accessing market-leading secured loans, as monthly payments are required with this type of loan and the lender will be worried about your track record of paying back.

Bridging Loans

Bridging loans were once niche financial products but are now slowly but surely gaining traction with both consumers and commercial borrowers. The primary difference between bridging finance and a traditional secured loan is the speed and simplicity with which the bridging funds can be released and that regular monthly repayments, unlike traditional types of secured and term loans, are not required.

Some specialist UK bridging lenders are very flexible when it comes to credit history. Even with those lenders that take a harsher line on poor credit, provided a suitable explanation can be given, it is often not the deal breaker it would be with more traditional types of secured finance, especially those requiring monthly payments. Provided the loan is satisfactorily covered by the security on offer, the security type is agreeable to the lender and the repayment vehicle or exit method to repay the loan is feasible, then all loans are normally considered. This enables much quicker and easier underwriting than with traditional secured or term loans.

When Bridging Loans Are Better?

Given the above, several common scenarios dictate when bridging loans may be preferable to conventional secured loans or term loans. A few examples would be:

  • The borrower’s security is not considered acceptable by conventional lenders. Bridging specialists tend to be far more flexible by way of eligible assets and property. They will consider land, partly completed properties etc., as security. Whereas traditional secured loans or terms loans are generally only considered for fully completed properties. One exception to this rule would be a self-build mortgage.
  • Any instance where the funds are required quickly, such as purchasing a property at auction.
  • When the borrower would prefer to repay the loan in full as quickly as possible, rather than spreading the repayments over several years. Bridging loans tend to be arranged for shorter periods than are available with traditional secured loans or term loans and can often be repaid prior to the end of the agreed period without penalties.
  • If the borrower’s credit history excludes them from conventional secured loans, requiring monthly payments.
  • If a borrower’s provable income would not service repayments of a secured or term loan.
  • All cases where the borrower’s application has already been rejected (perhaps repeatedly) elsewhere.
  • When significant sums of cash are needed quickly, such as to cover urgent expenses or for rapid repairs/alterations to a property or to pay tax bills.

To conclude, bridging finance is generally quicker and easier to arrange than traditional secured term finance. However, depending on the circumstances, both bridging loans and conventional secured loans can represent exceptional value for money.

Source: Shout Out UK

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Bridging lending breaks new records in Q2 2019

Bridging loan books grew to a record £4.62 billion at the end of the second quarter of this year, according to the Association of Short-Term Lenders (ASTL).

This represents growth of 11.7% compared to the first quarter of the year and an increase of 14.4% on the same quarter in 2018.

Bridging loan applications also hit a record total in the 12 months preceding the end of Q2 2019, with £22.13 billion of applications representing a 9.7% increase on the same period the previous year.

The figures were compiled by auditors from data provided by members of ASTL, which confirmed that more than £1 billion of bridging loans were written in the second quarter of this year, an increase of 11.8% on the previous quarter and a rise of 4.1% on the same period last year.

There were £5.69 billion of bridging loan applications in Q2 2019, which is 4% lower than the first quarter of the year but 5.3% more than the same period in 2018.

Benson Hersch, CEO of the ASTL, said: “The second quarter of this year has delivered some very strong results for bridging lending, with record values both for applications over a 12-month period and total outstanding loan books. In fact, nearly all measures were higher than last quarter and the same period in 2018.

“The wider political and economic environment remains uncertain and the challenge for the industry now is to continue this level of activity whilst maintaining high standards of underwriting and customer focus.”

By Joanne Atkin

Source: Mortgage Finance Gazette