Demand for bridging surges pre-Brexit – ASTL

The value of applications for bridging loans in the three months to June increased 61.5% on the previous quarter, totalling £3.5bn in the three months, according to the latest quarterly statistics from the Association of Short Term Lenders (ASTL).

The figure also surpassed the latest December quarter, which is typically the busiest period in the year, the body, which collected the data from its 36 members, said.

While some of the increase in the value of applications – a respectable 23% year-on-year – can be put down to intermediaries shopping around more, the research also showed the sector had been resistant to latest political developments affecting the mainstream markets.

Chief executive Benson Hersch said: “Bridging finance shrugged off pre-referendum doubts with a brilliant performance in Q2 2016. Members are cautiously positive about their firms’ business prospects, but very concerned about the economy as a whole.”

Early indications seemed to suggest funding lines for bridging loans could be running dry in the post-Brexit climate.

Recent research has suggested the values of deals written were down in the quarter, while demand for bridging loans had tapered ahead of the Brexit vote in late June.

The findings also indicated that both bridging and re-bridging had suffered as a result of a general rush to complete deals in Q1 to beat the Mortgage Credit Directive and Stamp Duty changes, followed by a cooling period after.

But Hersch said the rush for applications witnessed in the second quarter should translate into “healthy completions in the post-referendum period”.

On the whole, loan values written were on the up, he said. The association’s members wrote £2.85bn of bridging loans in the year to June, representing an increase of 17% on the previous year. Over the last two quarters bridging loan values increased 6% while ASTL members’ loan books increased 39%.

“In my opinion the need for bridging finance is likely to continue to grow, especially if other finance providers tighten criteria,” Hersch said.

Bridging brokers seem equally upbeat about the market. “It’s business as usual,” Searchlight Finance property finance specialist Simon Allen told Specialist Lending Solutions in July. Fellow brokers concurred, calling any disruption caused by Brexit a “non-event”.

What’s more, bridging could benefit from new underwriting rules for buy-to-let lenders as the prospect of tougher assessments creates a rush to snap up properties, experts have suggested.

The Prudential Regulation Authority is in the process of introducing tighter rules around affordability testing in the buy-to-let market in an attempt to reduce the operational risk of lenders.

Crystal Specialist Finance managing director and Association of Bridging Professionals executive committee member, Jo Breeden, said he has seen an increase in demand for bridging loans, and expects this to continue until Christmas.

He explained that landlords are seeing a lot of bargains in the market and using a bridge is the quickest way to snap up the property. The advent of tougher regulation is adding to the desire to buy properties sooner rather than later, Breeden said.