You are here: Home - Specialist Lending - Bridging -

Bridging in continued show of strength post-Brexit – West One

by: Carmen Reichman
  • 22/09/2016
  • 0
Bridging in continued show of strength post-Brexit – West One
Bridging lending rose 3.3% in the month following the Brexit vote, according to latest figures from West One Loans.

The firm’s latest index found UK bridging reached gross annual lending levels of £4.4bn in July after rising 3.3% on the previous month, when the UK voted to leave the European Union, creating widespread uncertainty in financial markets.

Demand for the short-term finance products was boosted by a diminished willingness from high street banks to lend and the continued growth of house prices, West One said.

Citing Bank of England money and credit statistics, it suggested traditional high-street banks had reduced mortgage lending by 12.8% year-on-year in July, pushing borrowers to seek alternative forms of finance to secure their homes.

It also pointed to the latest Nationwide house price index, which found property prices had grown 5.6% year-on-year and 0.6% in July. This spurred sustained levels of purchasing and auction activity post-referendum, West One said, which led to more bridging loans being taken out to secure properties.

West One managing director Stephen Wasserman said: “Once the initial surprise of the Referendum subsided, bridging lenders got back to business. While some deals did fall through at the end of June, plenty of new opportunities have appeared. With funding from traditional lenders drying up, the short-term finance sector has stepped up to plug the financing gap.”

Although there is evidence demand for properties waned following Brexit, house prices have so far largely stabilised. This is mainly due to a shortage of housing stock, which allowed sellers to maintain the upper hand over buyers by holding firm on price.

Overall, bridging gross lending has doubled in the last two years, after growing continuously since reaching a record of £2.23bn in September 2014.

However, while the residential market appeared to be relatively unaffected by Brexit, the commercial market slowed, West One said.

It found there were 1.7% fewer commercial property transactions in July compared with the same month last year, representing the first year-on-year drop since April 2013. This was due to a dip in demand for short-term finance as part of funding commercial developments, the firm said.

Sizes of typical bridging loans also fell 9.6%, from £883,000 in May to £798,000 in July, as lenders became more cautious following the leave vote.

Similarly, the average loan to value ratio fell one percentage point since the referendum, having already fallen 50% since the end of 2015.

Interest rates returned to 1.14% in July – the same level as May – after rising to 1.16% in June. West One said it expects further falls in interest rates in the wake of the Bank of England’s historic base rate cut to 0.25% in August.

Wasserman said: “While the leave vote may have surprised many, it was not unforeseeable. Robust underwriting standards, low loan-to-value ratios and rigorous assessment of exit strategies have enabled short-term lenders who prepared for both Referendum outcomes to thrive despite financial headwinds. This preparation involved securing high quality deals through prudent practices, which allowed some lenders to expand even in these lean months, while still remaining protected against future uncertainty.”

West One’s findings appeared to echo a recent survey by the Association of Short Term Lenders (ASTL), which detected an upswing in sentiment among its members in August.

ASTL found 71% of lenders felt their business volumes would grow over the next six months, up from 31% in June. Lenders were also positive about the long term future for the UK economy, with 30% saying they had a positive outlook compared with 6% at the end of June.

However, more than half of ASTL members (55%) did not think the bridging market as a whole would grow over the next six months.

Brokers and bridging lenders already told Mortgage Solutions in July that for them, bridging post-Brexit was ‘business as usual‘.

There are 0 Comment(s)

You may also be interested in