Buy-to-let alternative finance use at record high

Robyn Hall

April 19, 2013

West One surveyed 350 mortgage brokers and found a record 36% of intermediaries listed buy-to-let as the most popular use for bridging loans.

Duncan Kreeger, director at peer-to-peer bridging lender West One Loans said: “A generation of renters are demanding somewhere to live and a growing army of landlords need loans to make the required investments.

“The latest sky-high rental figures demonstrate that hunger for more investment. But cash-strapped banks are still hesitant to make a serious commitment.

“The supposed upturn in traditional lending isn’t meeting this need and unless someone is willing to put their money where their mouth is that won’t change.

“That’s why alternative finance and peer-to-peer lending models are proving so popular. Particularly since deals can be done in days rather than months.”

Despite the reported increase in popularity the majority of mainstream borrowers do not understand alternative finance.

More than three quarters (76%) of brokers surveyed said their mainstream mortgage clients do not understand the industry or the processes involved.

Kreeger said: “Even when a bridging loan is the most appropriate solution it’s clear that the overwhelming majority of borrowers would struggle to understand the practicalities – or the opportunities.

“Brokers are increasingly able to provide support. But the rise of alternative finance for buy-to-let investments illustrates just how many property investors could have made use of bridging but are currently missing out.”

More brokers are seeing an expansion of alternative finance. A record 79% of brokers saw their own bridging business increase compared to 72% in November.

The bridging industry as a whole has seen growth of 49% over the last 12 months. This compares to 51% reported annual growth in November and 46% in August 2012.

Kreeger added: “Gross bridging lending smashed the £1.5bn mark at the end of last year.

“Brokers certainly agree that this will keep rising, even if at a slightly more sustainable rate.

“Also, as our partners on a daily basis, it’s encouraging to see the opportunities of a growing industry split between a bigger proportion of brokers.”

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