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Bridging lending hits record high

Nia Williams

February 7, 2014

This brings annual growth in gross bridging lending to 27% – up from £1.57 billion in gross bridging lending in 2012.

In the two month period from 1st November to 1st January 2014, industry gross bridging lending was £419 million, up 5.5% from £397 million in the previous two months.

If lending continued at this rate for a year, gross lending in the next twelve months would be £2.51 billion per year.

Commenting Duncan Kreeger, director at West One Loans, said: “Bridging has grown up from the industry it once was, and it’s still evolving in 2014. Lenders are expanding and opening their doors to different types of borrower.

“An economy on the move needs rapid finance that can really get projects started – and short-term secured lending is moving to fill that gap.”

The most significant factor powering the expansion of gross lending is growth in the number of deals agreed, according to West One.

Industry loan volumes during the two months ending 1st January increased by 10.8% compared to the previous two month period. This brings loan volumes for the whole of 2013 to levels one third (33%) higher than the preceding twelve months.

Meanwhile, the average value of a bridging loan was largely static. The average loan is now worth £459,000, representing a slight drop of 1.4% from the two months ending 1st November.

On an annual basis, loans in 2013 were larger than the previous twelve months, in line with the long term trend. For the last twelve months as a whole, loans averaged £430,000, or 5.2% more than the average loan in 2012.

Loan-to-value ratios across the bridging industry have also risen – by almost one percentage point in recent months. In the two months to 1st January the average LTV was 48.1%, or 0.9 percentage points higher than LTVs of 47.2% in the previous two month period to 1st November.

On an annual basis loan to value ratios are still lower than previous highs. The average LTV across all twelve months of 2013 was 46.4% – down from 48.0% in 2012.

As a whole, 2013 witnessed the lowest interest rates on record for the bridging industry, averaging 1.19% across the entire year. This compares to 1.37% in 2012 and an average interest rate of 1.55% in 2010, the first year of the West One Bridging Index.

Mark Abrahams, CEO of West One Loans, concluded: “Nearly seven years on from the financial crisis, markets are still shaking with volatility.

“Equities of all kinds are far too risky to form a large portion of most investors’ portfolios, and most fixed income products are set for years of trauma as central banks begin to wind up artificial bond-buying programmes like quantitative easing.

“As mainstream lenders already feel the first withdrawal symptoms from artificial stimulus and special measures, money from normal investors will be more in demand in 2014. And from a lending perspective, that will also be a serious advantage for privately funded lenders.”


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