Marijana No Comments

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

Marijana No Comments

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.

Marijana No Comments

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

Marijana No Comments

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

Marijana No Comments

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

Marijana No Comments

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

Marijana No Comments

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

Marijana No Comments

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

Marijana No Comments

Bridging finance regarded as well established in British mortgage market

Bridging lenders in the UK are positive about the future with the majority expecting this sector of the mortgage industry to grow, according to a new sentiment survey.

The upbeat outlook from members of the Association of Short Term Lenders (ASTL) suggests that the use of bridging loans as a financial tool for property transactions is well established.

Some 78% of members expect their business turnover to grow and 63% are expecting the same of the bridging finance sector as a whole. In addition, they are very positive about the prospects of providing short term finance to SME house builders with 93% believing that this is a growth area.

However, members are slightly less sanguine about the long term future prospects of the UK economy, positivity has decreased from 50% in December 2017 to 43%. No less than 52% are unsure and only 11% are negative.

The survey report says that this is likely due to the protracted nature of the Brexit negotiations combined with the rise in inflation which in turn is likely to lead to higher interest rates.

Members are split about the direction of property prices, with 52% expecting slight growth and 48% expecting prices to fall. They are lukewarm about the potential impact of the Spring Statement, with 48% neutral and 19% negative.

‘Whilst I remain cautious about future prospects for the UK in a very uncertain world, in which the economic climate can change overnight, members are confident that they will continue to prosper,’ said Benson Hersch, ASTL chief executive officer.

‘The use of bridging as a financial tool, both for property transactions and for other business purposes is now well-established,’ he added.

Source: Property Wire

Marijana No Comments

Bridging lending crashes through the £3bn mark

Annual bridging lending completions rose by 24.6% to over £3.5bn in 2017, ASTL figures show.

Bridging completions for ASTL members in the fourth quarter of 2017 exceeded £1bn, an increase of 31.7%.

Benson Hersch, chief executive of the ASTL said: “Our figures highlight that, despite ongoing concerns relating to Brexit and the property sector, the bridging finance industry remains in good shape and is ready and willing to meet the challenges that 2018 may bring.

“The bridging sector continues to provide a vital role in the economy by offering customers access to the capital they need in a responsible and sustainable way.   It continues to be an important part of the alternative finance market.”

The size of members’ loan books is also healthy. Total loan books are continuing to climb, with a rise of 4.6% compared to Q3 2017. Compared to the end of Q4 2016, the value of loan books has risen by 12.9%, to £3.7bn.

These figures are taken from the responses from ASTL members, which include most of the key lenders in the bridging market.

Source: Mortgage Introducer