Brokers demand higher LTVs amid strong Q1 bridging growth

The lender surveyed 119 brokers with 30% seeing 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.

The most popular reason for taking out a bridging loan was to fund a development project at 27%, up from 19% in the fourth quarter of 2017.

Purchasing an investment property was the second most popular reason at 24%, followed by refurbishment at 21%.

This growth in development funding echoes figures from the Association of Short Term Lenders which showed lenders were increasingly servicing this market.

Higher LTVs

While reasons for choosing a lender were split, the key issue for lenders to enhance their offering was clear – 42% of brokers wanted to see higher loan-to-values (LTVs) available.

Around one in four respondents wanted greater flexibility on commercial lending, or faster turnaround times respectively.

None of the brokers surveyed felt the need for lower rates or further transparency.

Sector competition

The bridging sector has grown noticeably over the last six months with new lenders entering the market and rates falling as demand for short-term finance grows.

As a result, several lenders and brokers have reported record months, while competition was also the key issue cited as facing the sector by 37% of brokers.

The reasons cited for choosing a lender and what lenders could do to evolve their offerings also reflected the changing dynamics within the market.

Interest rates and pricing were the most important reason when choosing a bridging lender at 39%, with 33% of respondents saying flexibility was a key issue.

A quarter (26%) cited speed of completion as paramount but just 2% said an existing relationship with a lender was the most important factor.

MTF head of new business James Anderson 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.”