Bridging market to hit £2.7b in 2014
Expansion will bring gross bridging lending to over £2.7bn over the course of 2014, after gross lending of £1.93bn in the twelve months to 1 November.
Lending in 2014 will be more than three times greater than total lending in 2011, when gross bridging lending totalled £0.91bn.
Duncan Kreeger, director at West One Loans, said: “Bridging loans provide crucial support for credit-worthy borrowers and great ideas. In a warming economic climate, that support is vital for growth.
“Bridging has grown up over the course of the recession – just as most mainstream lenders have wandered into troubled waters.
“Now that the economy is picking up, all forms of alternative finance are steaming ahead – and bridging in particular is making the most of the competitive advantage won in the dark days of recession.
“Looking at the figures so far this year, brokers’ expectations are looking pretty spot on. And 2014 looks particularly exciting given how accurate the same predictions from intermediaries were a year ago.”
Brokers expect loan to value ratios in the bridging industry to rise in 2014. The net proportion of those expecting higher LTVs, minus those expecting lower LTVs, has hit a record high – with a net 38% expecting higher loan to value bridging loans. The latest West One Bridging Index shows average LTV currently stand at 42.8%.
Kreeger added: “Higher LTVs will allow bridging lenders to lend on more ambitious projects. Bridging loan sizes have already doubled on average since 2010 – but most recently LTVs have been falling as property has risen in value.
“That has left plenty of capacity for larger loans, which will be realised over the next twelve months.
“This expectation confirms that loans will keep growing next year, making more use of increasingly valuable security.
“Larger loans are particularly great news for the biggest deals in both the property and small business markets, which rely on rapid access to considerable finance.”
Bridging interest rates are expected to fall over the course of 2014. A net proportion of brokers expect lower rates in twelve months’ time compared to prevailing conditions in November.
This comes as the latest West One Bridging Index shows rates averaged 1.22% in the year to 1 November, down from 1.38% in the previous twelve months.
However, in line with wider financial conditions, expectations for bridging interest rates have revealed a turning point.
A net 27% of brokers expecting lower bridging product rates in November compares with a net 49% expecting rates to continue falling in March. November’s figure represents the slimmest majority of brokers expecting lower rates for one year.
Kreeger concluded: “For around half the price of borrowing on credit cards, businesses and individuals can access loans of up to millions of pounds via the bridging industry.
“That’s ideal for the most economically vital projects – in need of significant sums for short periods of time.
“While the wider economy struggles to balance recovery with rising interest rates, bridging continues to grow more useful and more affordable.”