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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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2019 will be the year of rebridging

Rebridging will define 2019, as mainstream bridging lenders are likely to get nervous about extending deals, Chris Oatway, founder and director of LDNfinance, has predicted.

He said that mainstream lenders may want to do less rebridging this year as no one wants to keep rebridging a deal multiple times, leaving room for others to step in. He also pointed to bridge to sell as another growth area.

Oatway (pictured) said: “There’s been a lot of rebridging over the last couple of years, increasing month-on-month. We still see there being a massive market for rebridging. The year of the rebridge is still ahead.

“Rebridging and bridge to sell will be strong this year due to the slow market. Every deal is taking longer to go through so I can see both of these areas growing.

“The mainstream lenders won’t stop rebridging but I think they’ll get more nervous in that area, spending more time assessing the deal, making a decision and not saying yes to everything like they may have been doing before.

“However, that section of the market will still be serviced by other lenders. There’s so many options you can have for bridging finance that no matter what the requirement is, whether rebridging or bridge to let, it will be serviced because there’s enough people out there to cater for it.”

Oatway said you just have to know who to speak to make sure you can get these rebridging deals done and he’s seen a lot of distressed sales with auction deals where people want to get out of it quickly, pre and post Brexit.

Oatway added: “Auction purchases will also remain strong but are not likely to significantly increase, in proportion to the bridging market, unless there is a hard Brexit and a big knock-on effect.”

By Michael Lloyd

Source: Mortgage Introducer

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Brexit may be to blame for fall in regulated bridging loans

Potential buyers taking stock of an impending Brexit may be behind regulated bridging loans falling in the third quarter to the lowest level since Q1 2015.

That’s according to Gareth Lewis, commercial director at MT Finance (mtf), as it was revealed the number of regulated loans conducted by Bridging Trends contributors fell for the second consecutive quarter. They dropped to 31.6 per cent of all lending in Q3 2018, compared to 36.8 per cent during Q2 2018. This is the lowest level since Q1 2015, when the number of regulated bridging loans transacted was at 31.5 per cent of all lending.

Lewis said: “The data continues to show that property investors are seeking attractive opportunities to acquire properties where they can add value, a trend that shows no sign of slowing down. Conversely the transaction flow in the regulated space has continued to show signs of slowing down. Is this a direct response to the everyday purchaser taking stock of Brexit and holding fire before looking to commit to the purchase of a new residence?”

Bridging loan volume transacted by contributors hit £213.35 million in Q3 2018, an increase of £15.4 million on the previous quarter. This is the highest figure to date and comes as another new contributor joins Bridging Trends — specialist finance packager, Clever Lending.

First legal charge lending increased to 84.4 per cent of all loans during Q3 2018, up from 80.9 per cent in the second quarter. Meanwhile, second charge loans decreased to 15.6 per cent compared to 19.1 per cent during Q2 2018.

For the second consecutive quarter, refurbishment purposes were the most popular reason for obtaining a bridging loan, as borrowers continued to add value to existing and newly purchased properties.

Mortgage delays were the second most popular reason for obtaining a bridging loan, accounting for 19 per cent of all lending, down from 20 per cent in the previous quarter.  Whilst loans for auction purchases and business purposes increased in the third quarter by 3 per cent and 1 per cent respectively.

The average monthly interest rate dropped to 0.78 per cent in Q3, from 0.83 per cent in Q2 2018 — the lowest rate recorded since Q4 2016. This activity translated into lower LTVs, with average LTV levels in Q3 decreasing by 1.5 per cent to 55.4 per cent.

The average completion time on a bridging loan application jumped to 46 days during the third quarter from 43 during the second quarter, as service and resource levels were impacted by annual leave. The average term of a bridging loan in the second quarter remained at 11 months.

Sonny Gosai, head of specialist lending at Clever Lending, says the business is privileged to be on board with Bridging Trends, which “provides much needed analysis of the market”. He added: “The bridging industry is booming at present and forms a large part of our key distribution and remains one of our main focuses.

“Whilst the data suggests that there has been a drop in regulated bridging activity, we have recently set up a team solely to provide regulated bridging advice as we have seen a growth in this area particularly for enquiries. It will be interesting to see the next quarter’s Bridging Trends results.”

Meanwhile, Luke Egan, head of specialist property finance at Pure Commercial Finance, says the market is becoming more competitive. He said: “Regarding the drop in regulated bridging transactions, we operate slightly different to a lot of specialist brokers as we take a large amount of direct business, so we have more regulated bridge enquiries as a lot of clients are home movers.

“However, the market is becoming more competitive which would explain the decline to an extent as there is a finite amount of business being passed around a larger number of people.

“Interest rates seem to be only going one way. I believe one of the main regulated bridging lenders will drop their rates again soon in order to stand out in a crowded marketplace. Completion times increasing again is a worry, speed seems to a forgotten pre-requisite of bridging and more of a USP these days.”

Source: Bridging Directory

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Bridging set for another boost – London Credit outlines why 2018 looks set to be another excellent year for the bridging finance sector

Bridging finance continues its rise as a truly effective funding option. Industry bodies have reported a record year in 2017 and the indicators show that this is set to continue this year, still playing a vital role in helping to fund property renovation and change of use. With the supply of rental property still in high demand, short-term finance has an ever-increasing role to play in easing the housing crisis and supplying businesses with much-needed funding to expand their premises.

The demand for bridging finance doesn’t seem to have been dampened by several legislative changes to the buy-to-let market: more stringent affordability tests, tax relief and stamp duty rules were all introduced last year, but the demand for bridging has remained strong.

Even the PRA rules, which mean that landlords with four or more buy-to-lets need to submit details of their existing mortgaged properties, haven’t dampened demand. Now that the new rules have had time to settle in, we’ve seen a steady stream of enquiries from portfolio landlords for blocks of flats for student accommodation and HMOs for young professionals. This is particularly important in major cities where rental accommodation is at a premium, as house purchase is still a pipedream for many, despite the stamp duty relief for first-time buyers in the Autumn Budget.

The purchase price of a property is a key factor in determining yield for a landlord and, depending on the amount of renovation needed, can help keep the costs down. As long as the property is rented out at the market rate for that area, higher yields could result.

Auctions remain a good way for investors to acquire property at a competitive price, often below market value, and 2017 was another positive year for auction sales. Landlords and developers are snapping up residential rental and commercial units, particularly when work is needed on the property for either refurbishment or change of use. At an auction, completion needs to happen quickly, often within 28 days, so bridging finance is the ideal way of making this happen.

It’s vital that developers get a fast turnaround, so they can start work on the property as soon as the funding is in place, allowing them to shorten the time it takes to get the property on the rental market. To exit the bridge, some of our clients refinance to a longer-term loan with a more traditional lender or sell the property at a profit.

In short, the bridging finance sector is in great shape, and despite legislative changes and Brexit uncertainty, it’s proved to be resilient to such factors. There is a range of lenders servicing a variety of funding types and loan sizes, with more alternative products on offer than we’ve seen for many years. Short-term finance offers a real alternative to mainstream funding sources and bridging remains one of the best ways to act quickly when opportunities arise. It looks set to remain just as popular in 2018.

Source: PR web

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UK bridging finance hits pre-Brexit high

Bridging finance provider West One’s latest index, released on Tuesday, showed that gross annualised lending increased from £4.3bn in the second quarter to £4.7bn – exceeding 2016’s pre-EU referendum high of £4.4bn.

UK BRIDGING lending rose to a pre-referendum high of £4.7bn in the third quarter, according to new research.

The index, which uses the company’s data as well as statistics published by the Association of Bridging Professionals and other UK bridging loan providers, also found that the emerging trend of smaller transaction sizes had continued into the third quarter.

Average loan sizes within the bridging finance sector dropped below £600,000, compared to averages above £900,000 at the same time last year.

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This reflects the relatively depressed market for high-end properties with values over £1m, particularly in London, West One said.

However, there has been a large volume of smaller transactions, meaning that total lending held up well in the third quarter as the figures show.

West One predicts a further rise in bridging rates in the fourth quarter, although the sector remains highly competitive.

Read more: Funding Circle borrowers back joining European Free Trade Agreement post-Brexit

“The bridging sector has performed well during the third quarter, despite the backdrop of concern around the progress of Brexit negotiations, and economic indicators pointing to both a slower economy and to the interest rate rise that ultimately came in November,” said Danny Waters, chief executive of West One’s parent company Enra Group.

“Whatever happens next, the industry must continue to adapt to conditions, and provide the diverse and flexible funding options that property professionals need, so they can take advantage of the changing, regional landscape that we are seeing develop.”

Read more: Want to invest in property? Then take a look at these peer-to-peer platforms

Source: P2P Finance News