Bridging loans get bigger

Sarah Davidson

October 30, 2012

Quarterly gross lending grew by 14% from £348m in Q2 to £399m in Q3. Lending in Q3 was 65% higher than the equivalent period in 2011.

On a twelve month basis, lending rose 12% from £1.26bn in the year up to June to £1.42bn in the year up to September.

The number of loans granted in Q3 grew by 6% from Q2, leaving loan volumes 18% higher than in Q3 last year.

And West One said increased demand for loans from business people is starting to impact the breakdown of lending between residential, commercial and mixed property.

Residential lending accounted for 82% of total lending in Q3, representing a fall from 86% in Q2, but well above the average of 81% for 2011 and the 70% seen in 2009.

Duncan Kreeger, chairman of West One Loans, said: “Residential lending is still a major source of growth – particularly loans to buy-to-let investors.

“The bridging industry is maturing and becoming an established sector in its own right. The days when bridging was seen as a last resort for desperate borrowers are a distant memory.

“It has become an indispensable source of finance for society. It is attracting more credit-worthy borrowers, who now see it as a legitimate alternative to high street finance.

“Property developers rely on bridging lenders to fund projects that the high street won’t back in these straightened times. Without these developers, whole transaction chains stall and the housing market would fall deeper in to trouble.

“The bridging market has taken steps into the unknown this year, and taken them confidently. Professional standards have improved significantly.”

Over the quarter LTVs have fallen – despite the increase in average loan sizes. The average first-charge LTV in Q3 was 46%, down from an average of 48% in Q2. This also leaves LTVs down in a year-on-year comparison, with the average LTV in Q3 1 percentage point lower than in Q3 2011.

The average rate on a bridging loan fell to 1.31% in Q3 from 1.43% in Q2. This marks a return to a longer-term trend of falling rates that dates back to early 2009. The drop is a fall from Q3 last year when rates averaged 1.39%, and is also significantly lower than the average for 2011 of 1.42%.

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