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Bridging market boom offers opportunities to all brokers

The bridging market has had a really positive 2021 so far. Just like the rest of the housing market, the stamp duty holiday has played a part, but it would be wrong to think activity is going to drop off sharply now the first holiday deadline has passed.

A recent study by Shawbrook Bank polled advisers on which areas of the market were most likely to grow in the second half of the year, with bridging taking top spot having won the votes of more than a quarter (26%) of advisers, ahead of semi-commercial and buy-to-let.

There’s evidently a real expectation amongst advisers that the appetite from investors, who like to take advantage of bridging loans in order to secure those additions to their portfolio quickly, is not going to drop any time soon and is in fact likely to grow.

This market growth presents a real opportunity for everyone in the adviser space, from those specialists who focus on short-term finance to those individuals or firms who perhaps handle only a case or two a year.

Cashing in on competition

Lenders are well aware of the levels of demand from advisers and their clients for quality bridging products. And in a bid to stand out from the crowd, they are taking a fresh look at their product propositions, trying to identify ways to make those products even more attractive to would-be borrowers.

In recent weeks we’ve seen not only new entrants to the market, promising to do things slightly differently, but also a host of rate revisions with some lenders even unveiling their lowest ever rates.

To find out more about how we can assist you with your Bridging Finance requirements, please click here to get in touch

It’s pretty clear there is real momentum within the bridging market at the moment, with borrowers the ones to benefit from the ongoing battle between lenders who are cutting rates and attempting to innovate regarding their product design.

Taking a personal approach

One area that has been particularly heartening for me has been the way that lenders are approaching cases which are a little out of the ordinary.

It’s one thing to find finance for a vanilla deal, a simple transaction where the client and the property being borrowed against fall comfortably within the criteria of any lender.

Yet recently we have seen a fair few cases which have been anything but vanilla, and not only have we been able to find lenders willing to consider the cases, but they have completed incredibly quickly too.

There is not only a healthy level of competition across the bridging sector as a whole but also plenty of lenders who are willing to take a more personal approach by going through all of the details of an individual case to assess just how happy they may be to take it on.

Finding the right deal

However, finding the right deal for your clients is not always straightforward when bridging is an area of the market you only deal with on an occasional basis.

If you have maybe one or two bridging clients a quarter, or even each year, then it’s simply not realistic to expect to be on top of the latest price and criteria developments, which can mean you don’t follow up on those client enquiries.

It doesn’t have to be that way though. By partnering with a specialist, who you are confident will treat the client with the same level of professionalism that mainstream mortgage advisers pride themselves on, you can ensure that not only the client receives the best possible advice, but also strengthen the relationship you enjoy with that client, boosting the chances of them remaining on your books for the long term.

By Liam Hughes

Source: Mortgage Introducer

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Bridging loan market steady at £146.5m in second quarter

The bridging loan market has remained stable in the second quarter, rising to £146.5m from £144.5m in the first quarter, with first charge loans making up the majority of lending.

According to quarterly publication Bridging Trends, first charge bridging loan applications made up 90 per cent of market volume, up 12.2 percentage points from the prior quarter.

The report said this was partially motivated by investors and landlords seeking taking advantage of the stamp duty holiday.

The most common reason for using bridging loans was funding a purchase of an investment property, accounting for just under a quarter of contributor transactions, slightly up from Q1.

Traditional chain break was the second most popular use of bridging finance at 20 per cent of transactions, roughly in line with previous quarter.

Regulated refinance dropped to five per cent of contributor transactions, from 13 per cent in the prior quarter.

Regulated bridging loans fell in the second quarter, going from 47.7 per cent to 41.6 per cent.

The report noted that average monthly interest rates marginally increased in Q2 to 0.79 per cent, up from 0.74 per cent in the previous quarter.

Average bridging terms were 12 months with no quarterly change.

The average loan to value levels fell slightly from 55.2 per cent to 54.9 per cent, which the report said implied borrowers were not “overstretching themselves”.

The time taken to process a loan application also fell, with average completion times pegged at 47 days, down from 53 days in the first quarter. This was the lowest recorded timescale for completions since the second quarter of 2019.

To find out more about how we can assist you with your Bridging Finance requirements, please click here to get in touch

Gareth Lewis said: “As purchases would have been at the top of people’s minds due to the stamp duty saving, it’s no surprise to see that first charge lending has significantly increased its share of transactional volumes.

“It will be interesting to see if this percentage decreases in the coming months as consumers look to raise finance out of existing properties to fund further property acquisitions or businesses.”

Chris Whitney added: “It looks like we have reached quite a stable platform over the last two quarters. Any previous pandemic worries seem to have been put to one side with the stamp duty holiday deadline creating a frenzy of activity. The higher level of investment purchases shows confidence in the UK property market is strong.

“I am slightly surprised that lending volumes weren’t higher. The market certainly felt very busy as we struggled to get valuers out in a timely manner due to volumes and many a solicitor was having to burn the midnight oil to keep up with demand.”

Stephen Watts said it was encouraging to see completion times had shortened since the last quarter as it suggested lenders were streamlining their processes to include remote valuations.

He added: “Some lenders are now offering AVMs up to 75 per cent loan to value (LTV) in some circumstances and with the ability for asset managers to benefit from modern technology and carry out virtual client meetings, more loan applications are benefitting from these time saving factors.”

By Anna Sagar

Source: Mortgage Solutions

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Stamp duty holiday fuels bridging activity

Landlords and buyers rushing to complete before the stamp duty holiday started tapering off helped stabilise the bridging market in the second quarter of 2021, according to the latest Bridging Trends data.

Funding an investment purchase was the most popular use of bridging finance whilst the number of first charge bridging loans increased as buyers rushed to complete purchases.

The bridging market held steady in the second quarter at £146.52m, up on the previous quarter (£144.51m), contributors reported. However, regulated bridging loans transacted by contributors dipped in Q2 – falling from 47.7% to 41.6%.

To find out more about how we can assist you with your Bridging Finance requirements, please click here to get in touch

The average completion time on a bridging loan application in the second quarter reduced to 47 days, from a record 53 days in the first quarter. This is the lowest figure recorded since Q2 2019 (44 days).

Chris Whitney said: “It looks like we have reached quite a stable platform over the last two quarters. Any previous pandemic worries seem to have been put to one side with the stamp duty holiday deadline creating a frenzy of activity.

“The higher level of investment purchases shows confidence in the UK property market is strong.

“I am slightly surprised that lending volumes weren’t higher. The market certainly felt very busy as we struggled to get valuers out in a timely manner due to volumes and many a solicitor was having to burn the midnight oil to keep up with demand.

“Nice to see the time it takes to draw a loan heading in the right direction albeit was that again stamp duty deadline linked? It will be interesting to see where that is at in the next quarter.”

Matthew Corker added: “We’ve seen a dramatic rise in searches across our bridging section throughout this quarter. ‘Regulated bridging’ has consistently appeared as one of the most searched terms on our system throughout 2021, holding the top spot in April, May and June, likely due to buyers wanting to secure their onward purchase before the end of the stamp duty holiday.

“Interestingly, we’ve also seen a general rise in search numbers in more traditional bridging categories, suggesting that the usual summer lull may not be as pronounced this year.”

Gareth Lewis concluded: “As purchases would have been at the top of people’s minds due to the stamp duty saving, it’s no surprise to see that first-charge lending has significantly increased its share of transactional volumes.

“It will be interesting to see if this percentage decreases in the coming months as consumers look to raise finance out of existing properties to fund further property acquisitions or businesses.”

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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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

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Bridging Loans – Why You Need Them, When You Need Them & How To Apply For One

When utilised properly, bridging loans are among the most effective commercial finance products. We try to answer a few burning questions about such loans in this post.

If you operate in the property market, you already know that time is of utmost importance. A good deal can become unreasonably expensive if you can’t close it in time. Worse yet, someone else is almost always ready to swoop in and steal the deal from you.

In short, if you can’t move at a rapid pace, you’ll only make things difficult for you.

But then again, it’s never easy to get property deals worth hundreds of thousands of pounds through without having some time to think, consult with people and arrange for funds. The last part – that of raising money – eventually turns out to be the bottleneck.

Breaking that bottleneck so that investors, developers, landlords and regular buyers can ‘realise’ their dream deals is the prime focus of all bridging finance products.

Before We Start – A Quick Look At What Bridging Finance Really Means

There are quite a few myths that regularly float around bridging loans, especially amongst first-time borrowers. For now, we will just try to clear the air by defining what bridging loans are.

What Are Bridging Loans?

Bridging loans are short-term loans taken (usually) by commercial entities to help ‘bridge’ the gap between required funding and available (or soon to be available) funding.

It’s common for people in the property market to use the terms ‘bridging loans’ and ‘short-term loans’ interchangeably – but that’s not always correct. An easier way to differentiate between the two is this: all bridging loans are short-term loans, but not all short-term loans are bridging loans.

Example

Let’s say you are a property developer. You already have an active project that’s nearing completion. You expect it to complete within next 10 months. For now, you’ve come across a good buy to let opportunity that you don’t want to miss out on. The only problem is, the seller wants you to make an initial deposit of £200,000. You already have active development finance on your project, so you know it’ll be tough to get a buy to let loan.

In this case, a bridging loan can be the most ideal way out. You can, for instance, take a six-month bridging loan with a fixed interest rate. This loan will cover the initial deposit for your new project – and can be paid back once the active project gets completed (i.e. your exit strategy will hinge on the competition of your active project).

Here’s how the numbers would typically work out for such a case:

  • The market value of the property to be used as security: £400,000
  • Maximum LTV offered by the lender: 80%
  • Maximum amount that can be borrowed: £320,000
  • Actual amount borrowed: £250,000
  • Initial deposit to be made: £50,000
  • Balance bridging loan amount: £200,000
  • Applicable interest rate:5% per month
  • Loan term: 12 months
  • Payable interest: £1,250 per month

Why Are Bridging Loans Used? Who Are They Aimed At?

There’s really no limit to the number of reasons people and businesses use bridging loans for.

Even though, at Commercial Finance Network, our bridging finance services focus on the property market, it’s important to note that bridging loans are used across all industries and sectors. They may take different names and forms, but the idea remains the same.

Bridging loans are aimed at people who are looking to enter the property market via any of the regular channels (buy to let, convert, develop or invest). Essentially, if you are a property developer, landlord or investor, you can and should use bridging loans as a viable financing option.

Here’s Why Bridging Loans Are Popular

  • Easy To Get: Bridging loans are easier to get if you have your business and personal credit history in good health. Even when you don’t, lenders on our panel might be interested in your application. You can get a loan for an amount as high as £200,000.
  • Fast: There’s no need to waste time. When you work with an industry-leading whole of market broker like Commercial Finance Network, you get a decision on your bridging loan application within 24 hours. More importantly, we make sure that the lender releases the funds to you swiftly.
  • Flexible: Bridging finance is incredibly flexible. It’s just a short-term loan, but can well be extended up to 12 months, should you feel the need to. Moreover, most lenders are willing to offer interest-only repayments (subject to the viability of your exit strategy).
  • Cheap: Bridging loans we broker come with lower-than-market interest rates. Some of our lenders offer interest rates as low as 4% per month. It should, however, be noted that bridging finance is more expensive than long-term mortgages.

When Should You Consider Applying For A Bridging Loan?

Bridging loans are a specialty commercial finance product. Therefore, to make the most of what they have to offer, you need to know and understand when they are a good option.

Here are some common scenarios that are tailor-made for bridging loans:

Buy To Let Projects

Buy to let projects are well served by bridging loans – especially when your existent credit line/loan is fully invested in another active project.

Residential/Commercial/Mixed Use Development

Development projects, more often than not, end up stretching your budget too thin. There are a million fronts to fight on, and it’s not at all uncommon for developers to run out of money. Such situations – before the project starts or is already in progress – can be taken care of using a customised bridging loan.

Conversions/Refurbishment Projects

If you want to undertake conversion/refurbishment projects, you can take out a bridging loan to cover the costs.

Important: Know What Your Exit Strategy Is!

Bridging loans are incredibly useful when your back is against the wall. That, however, doesn’t mean that they can replace conventional, long-term financing options.

A bridging loan is best viewed as a temporary arrangement – one that saves the day.

Therefore, before you get into a bridging loan contract, it’s important for you to know how you’re going to exit. Common exit strategies include:

  1. Selling the property (being used as security)
  2. Getting a more robust, long-term development finance package or buy to let loan
  3. Placing a mortgage on your new property

Bridging Loans Timeline

A traditional mortgage would take weeks to ‘realise’. Bridging loans, thankfully, are faster.

When you work with us, we make sure that you get a decision from lenders within 24 hours. Once you decide to go ahead with a particular quote, the lender will proceed with the valuation of your property and assessment of your credit file. Everything said and done, a commercial bridging loan can go through within a matter of days.

Finally, How To Apply For A Bridging Loan?

If you don’t want to involve a broker in the process, you can approach lenders directly. This, however, is an approach fraught with risks. When you aren’t familiar with the lender’s approval criteria, you always have a very high chance of getting multiple applications turned down. This puts a dent in your credit score, making it even more difficult for you to get approved.

Such hassle can be avoided with ease, and for a very reasonable cost by working with a leading whole of market broker like Commercial Finance Network. We have on board a panel of UK-wide specialist lenders who are known to offer low interest rates and high flexibility of repayment.

Applying for a bridging loan is easy – just complete this form or call us on 03303 112 646 to get started.

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Bridging loan figures suffer slight fall but outlook is positive

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

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Bridging applications hit record value in Q1 2019

Bridging loan applications totalled more than £5.96bn in the first quarter of this year, representing growth of 13.6% compared to Q4 2018 and an increase of 6.9% on the same quarter last year.

The Association of Short-Term Lenders (ASTL) found applications for the year ending March 2019 were £21.8bn.

Benson Hersch (pictured), chief executive of the ASTL, said: “The results for Q1 2019 were a mixed bag. For completions, this was the lowest result since Q3 2017.

“On the other hand, the loan book total is the highest since Q1 2018 and the applications were the highest ever. We would expect this high value of completions to result in improved completions in Q2 2019.”

Bridging lender loan books reached £4.14bn in Q1 2019, up 7.9% from Q4 2018, although slightly down on the same period last year.

The value of completions during Q1 2019 was £898.5m, representing a 13.1% decrease on the same period last year.

Included in the figure for bridging completions was £92m of development loans. In addition to this, ASTL members wrote a further £206.6m of non-bridging development loans, making a total of £236.9m.

By Michael Lloyd

Source: Mortgage Introducer

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Bridging borrowers look to longer-term loans

Over the last few months property investors have been opting for longer-term bridging loans because of Brexit uncertainty, brokers and lenders alike have observed.

James Bloom, managing director of short-term lending at Masthaven Bank, said borrowers have been opting for longer-term bridging deals for more certainty by looking for 18-month non-regulated loans for both bridging and development.

He said: “Unfortunately because of the market exits take longer and if you exit the sale it’ll take longer to sell the property, so it’s inevitable the average length of the loan will increase in the market and you need products to match that. It’s a natural trend.”

James Hedges, a broker at Voltaire Financial, agreed and said that clients have been opting to take a longer-term bridge of around 18 to 24 months rather than the typical six to 12 months to give them a little bit more flexibility.

He added: “Clients typically are after a 12-month bridge because at the end of the loan they know they’ll be selling but with Brexit, they’ve been unsure whether it will be the right time to sell in 12 months’ time and don’t know where they’ll be, so they’re opting for longer-term bridges.”

Hedges pointed to the example of a deal on an office building where the client wanted a bridge to sell in six months’ time. However he opted for a longer-term bridge for more certainty because he was worried about the market collapsing, while he was also anxious his tenants could leave the office building and he’d struggle to replace them.

Hedges said: “But I think he’ll be fine because its well-located and everyone’s desperate for office space.

“There’s been a few deals where you typically get the shortest deal possible for the client because they typically just want some cash and then to sell the property, but clients are now looking for more certainty.”

Payam Azadi, director of brokerage Niche Advice, has seen the same trend but doesn’t think borrowers should be going for long-term bridging loans ideally.

He said that if a client wants a 70% loan-to-value bridge a lot of the costs gets added to the loan and if they’re servicing it and choose a 24-month term after the interest is paid they actually end up with a 50% LTV deal.

Azadi added: “We’re seeing clients look for longer terms but this could impact on how they service the loan.

“A longer-term only really works if a client is prepared to service a loan. Most clients I’ve come across don’t want to service it. And the exit strategy will impact on what people want too.

“When a borrower takes out a bridge and after six months can’t sell it, they shouldn’t look at keeping it for another six months. They should look to flip it into a buy-to-let or if they want to keep it, a longer-term bridge might be useful.

“But as a set rule bridging is supposed to be a short-term solution and there’s innovative ways you can look to meet the client’s needs without necessarily sitting on an 18-month bridge.”

By Michael Lloyd

Source: Mortgage Introducer

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Bridging finance industry is buoyant according to new survey

The bridging finance industry is in promising shape and continues to flourish. That’s the conclusion of Gareth Lewis, commercial director at MT Finance (mtf) after a new survey showed a spike in demand.

The desire for bridging loans increased in the third quarter of 2018, despite the traditional summer slowdown, according to the latest Broker Sentiment Survey conducted by bridging lender mtf.

Demand for bridging finance grew in the third quarter of 2018, with 48 per cent of brokers experiencing a rise in bridging loan volume, up from 38 per cent in the second quarter of 2018. And just 17 per cent of brokers did not experience a rise in bridging loan volume in Q3 2018.

Feedback from brokers points to a strong need for specialist lending but the geographical spread of bridging loan demand narrowed in the third quarter the year, with demand in the North West, South West and Scotland dropping from the previous quarter.

The South East saw the biggest demand for bridging loans in the UK at 48 per cent, up from 30 per cent in Q2. The second highest area of demand was London, at 41 per cent.

For the third consecutive quarter, funding development projects was the most popular reason for taking out a bridging loan at 31 per cent. Business purposes was the second most popular reason at 21 per cent, up from 16 per cent in the second quarter of 2018.

However, 66 per cent of brokers said the bridging loan process is longer than it was 12 months ago, while the majority, some 48 per cent, suggesting three to four weeks was the average length to complete a bridging loan. Meanwhile, some 21 per cent indicated that bridging loan cases generally took two to three weeks to complete. Of 113 brokers polled, 61 per cent blamed solicitors as the main reason for delays, followed by the valuer at 16 per cent.

And Lewis said: “The bridging finance industry is in promising shape and demand continues to grow, particularly from property investors looking to fund development projects in London and the South East.

“However, speed has always been a vital element in bridging finance and it is essential we don’t lose sight of this. It is important that all parties involved- the lender, lawyer, valuer and the broker, move swiftly to complete to the borrower’s schedule.

“It is important we stay true to the fundamentals of bridging: providing borrowers with fast access to the capital they need in a responsible and sustainable way and not fall in to the more traditional computer banking model.”

Source: Bridging Directory