Mortgage News
Bridging market could hit £1.5bn by 2012-end
With growth of up 14% in bridging lending in Q3, West One said bridging lending could hit £1.5bn by year-end, up from roughly £1bn previously.
The pace of growth in the bridging industry picked up in the third quarter, to match longer term trends and reverse a slowdown seen in Q2, according to the latest West One Bridging Index.
On the back of both larger loans and higher volumes, 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.
Duncan Kreeger, chairman of West One Loans, said: “Pain for the big high street lenders has been gain for bridging lenders. The recovery in the main mortgage market has been nipped firmly in the bud by renewed uncertainty.”
The number of loans granted in Q3 grew by 6% from Q2, leaving loan volumes 18% higher than in Q3 last year. Several percentage points of the quarterly growth are attributable to the extra bank holidays which dampened activity in Q2.
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In Q3, the bridging industry average loan size rose to £398,000 – up 8% from Q2, with loan volumes up 6% quarter on quarter.
Lucy Hodge, director at Vantage Finance, said: “Our bridging business has picked up noticeably in the last year. This is due to greater demand for finance as well as trickier conditions in other credit markets. Traditionally, bridging was a good – if not regularly needed – option for clients who couldn’t get mortgages. After the financial crisis this scenario has started to crop up far more regularly. People are becoming more aware of the opportunities presented by bridging too, and more of our clients explicitly ask if it might be a good option for them.”
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%.
Hodge said: “The sector has become incredibly competitive which has driven rates down to what I believe is the floor, or very near to it, to ensure that there is sufficient disparity between short term and mainstream lending. Inevitably the process has become more rigorous given the increase in general awareness of the sector and migration toward the mainstream lending world where liquidity in mainstream lending and project funding remains relatively poor.”
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. However, Kreeger said the real story this quarter is a pick-up in business lending.
“General business lending has stalled badly under the coalition,” said Kreeger.