The bridging market is a hive of activity at the moment. To illustrate what I mean, here is just a snapshot of what’s been going on.
Rates have tumbled
Shawbrook, Precise Mortgages, Octopus Property, Masthaven Bank, United Trust Bank, Together and West One have all sliced their residential bridging rates, which can now be found from just 0.54% a month from specialist lenders.
An article penned by Funding 365’s Mike Strange last month meanwhile revealed that almost all the loans that Funding 365 writes are now ‘materially below’ 1% per month.
Last month, Masthaven reduced the loan rate on its residential and buy-to-let bridging product range where there is a combination of first and second charge mortgages.
Under the new criteria, the total balance is priced at the first charge rate in reference to the overall loan to value (LTV). Where the overall LTV is below 40% on a residential bridge, the rate is now just 0.49 per cent a month.
Criteria is easing
On the criteria side, things are also moving. Together has raised the maximum loan size on its regulated bridging products, taking it from £1m to £2.5m for all plans, up to a maximum loan-to-value of 50%.
LTVs are rising, with three small lenders launching products up to 80% LTV in the past few months on a limited distribution basis. Valuation basis is also increasingly flexible, with more lenders prepared to consider LTV on gross development value.
Commercial is becoming more popular
Possibly driven by an increasing focus among developers on semi-commercial and commercial lets, competition is pushing rates down in commercial bridging as well.
Together has cut rates, with semi-commercial and commercial rates starting from 0.95% and 1% per month respectively.
Shawbrook overhauled its commercial offering in early April, announcing significant pricing reductions of up to 0.64% on commercial and up to 0.54% on semi-commercial products and an increased maximum loan size of £15m.
More money is coming into the sector
For years, the bridging industry has admitted it’s impossible to know just how many bridging lenders there are operating in the market. Too many are tiny, funded by private individuals, aren’t members of a trade body and operate in unregulated sectors.
Anecodotally, pundits suggest there are maybe 100, with around 25 larger specialist lenders. Over the past five years the number of these larger specialists has grown significantly, with many becoming fully authorised retail banks or morphing into peer-to-peer funded lenders.
Others, which have been around for decades under different brands, have revitalised their images, rebranding and securing new funding. Montello is now LendInvest and adorns advertising spots on the London tube. Blemain is now Together.
Masthaven joined the ranks of Precise Mortgages and Shawbrook as fully fledged banks, launching a range of retail savings products in late November last year, cutting its funding costs significantly.
Then in January, Oblix Capital secured £25m in new funding from NatWest. Also in January, Together revealed it had received £90m from Goldman Sachs to help boost its bridging finance activity.
In March, the former Dragonfly Property Finance team launched back into the short-term market with a new lender, Octane Capital, backed by Pamplona Capital Management.
And then news broke that Shawbrook Bank had rejected an £825m takeover bid from its majority shareholder, private equity firm Pollen Street Capital. Charter Savings Bank, the bank behind Precise Mortgages, is reportedly planning to float next year.
What does it all add up to?
Figures from the Association of Short Term Lenders show that demand for bridging loans soared in the last quarter of 2016, finishing the year at £2.88bn. Meanwhile, 85% of ASTL lenders felt that volumes would grow over the next six months, with none expecting business volumes to drop.
I’m not one for getting out the crystal ball, but it does seem to me that the market has gone from strength to strength over the past decade, with competition improving service and products for clients.
This has to be welcomed, however I am also cautious of our sector becoming too bullish on growth – we must ensure that quality continues, both in the offerings we put in front of clients but crucially, in the standard of deals we facilitate as a sector.
Lucy Hodge is managing director of Vantage Finance