Bridging loan volume rose by almost a third in the first quarter of 2018 as demand for short term finance remained strong, the latest Broker Sentiment Survey by lender mtf found.
Some 30% of the 119 brokers asked, experienced a rise in bridging loan volume, with the biggest demand coming from the South East at 50%, up from 47% in the last quarter of 2017. About 37% of brokers cited competition as a key issue facing the bridging finance sector during the first quarter of 2018.
Alan Dring, consultant at Hope Capital, said: “Business for my clients certainly rose in the first quarter which was very encouraging and I think competition stimulates that growth because there were significant changes on rates and LTVs and that is a reflection of a competitive market.
“This time of the year gets more exciting and the potential for continued growth is certainly there although the bad weather conditions in the first quarter would have caused delays to some developments.
The key issue is always the service levels that competition brings. I said competition would be biggest influence in 2017 and I think it was. It won’t go away in a robust market.
“The biggest aspects for 2018 wont’ be competition but will be education, collaboration and communication. They need to be appreciated by all the stakeholders.
“Competition is always good but whether you grow is down to how could your relationship is with your stakeholders and the opportunities they bring.”
Demand for alternative finance and an influx of cash into the space given the comparative attractive yields on offer has prompted new borrowers, investors, lenders and brokers to the market. This has facilitated its growth and continued acceptance into the mainstream as a viable financial tool.
Interest rates and pricing emerged as most important when choosing a bridging finance lender at 39%, while 33% of respondents said flexibility was a key issue. Some 26% cited speed of completion as paramount. A mere 2% said an existing relationship with a lender was the most important factor.
James Anderson, head of new business at mtf, said: “The feedback from brokers points to a strong need for specialist lending. Bridging finance is increasingly being used as a viable financial tool to provide real time funding to plug any gap before longer term finance can be put in place.”
Some 42% of brokers would like to see higher loan-to-values on offer in the bridging finance sector, while 27% of brokers want greater flexibility on commercial lending and 26% want faster turnaround times. None of the brokers felt the need for lower rates or further transparency.
The most popular reason for taking out a bridging loan in the first quarter was to fund a development project at 27%, up from 19% in the fourth quarter of 2017.
The purchase of an investment property was the second most popular reason at 24%, followed by refurbishment at 21%.