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Bridging applications hit record value in Q1 2019

Bridging loan applications totalled more than £5.96bn in the first quarter of this year, representing growth of 13.6% compared to Q4 2018 and an increase of 6.9% on the same quarter last year.

The Association of Short-Term Lenders (ASTL) found applications for the year ending March 2019 were £21.8bn.

Benson Hersch (pictured), chief executive of the ASTL, said: “The results for Q1 2019 were a mixed bag. For completions, this was the lowest result since Q3 2017.

“On the other hand, the loan book total is the highest since Q1 2018 and the applications were the highest ever. We would expect this high value of completions to result in improved completions in Q2 2019.”

Bridging lender loan books reached £4.14bn in Q1 2019, up 7.9% from Q4 2018, although slightly down on the same period last year.

The value of completions during Q1 2019 was £898.5m, representing a 13.1% decrease on the same period last year.

Included in the figure for bridging completions was £92m of development loans. In addition to this, ASTL members wrote a further £206.6m of non-bridging development loans, making a total of £236.9m.

By Michael Lloyd

Source: Mortgage Introducer

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Bridging borrowers look to longer-term loans

Over the last few months property investors have been opting for longer-term bridging loans because of Brexit uncertainty, brokers and lenders alike have observed.

James Bloom, managing director of short-term lending at Masthaven Bank, said borrowers have been opting for longer-term bridging deals for more certainty by looking for 18-month non-regulated loans for both bridging and development.

He said: “Unfortunately because of the market exits take longer and if you exit the sale it’ll take longer to sell the property, so it’s inevitable the average length of the loan will increase in the market and you need products to match that. It’s a natural trend.”

James Hedges, a broker at Voltaire Financial, agreed and said that clients have been opting to take a longer-term bridge of around 18 to 24 months rather than the typical six to 12 months to give them a little bit more flexibility.

He added: “Clients typically are after a 12-month bridge because at the end of the loan they know they’ll be selling but with Brexit, they’ve been unsure whether it will be the right time to sell in 12 months’ time and don’t know where they’ll be, so they’re opting for longer-term bridges.”

Hedges pointed to the example of a deal on an office building where the client wanted a bridge to sell in six months’ time. However he opted for a longer-term bridge for more certainty because he was worried about the market collapsing, while he was also anxious his tenants could leave the office building and he’d struggle to replace them.

Hedges said: “But I think he’ll be fine because its well-located and everyone’s desperate for office space.

“There’s been a few deals where you typically get the shortest deal possible for the client because they typically just want some cash and then to sell the property, but clients are now looking for more certainty.”

Payam Azadi, director of brokerage Niche Advice, has seen the same trend but doesn’t think borrowers should be going for long-term bridging loans ideally.

He said that if a client wants a 70% loan-to-value bridge a lot of the costs gets added to the loan and if they’re servicing it and choose a 24-month term after the interest is paid they actually end up with a 50% LTV deal.

Azadi added: “We’re seeing clients look for longer terms but this could impact on how they service the loan.

“A longer-term only really works if a client is prepared to service a loan. Most clients I’ve come across don’t want to service it. And the exit strategy will impact on what people want too.

“When a borrower takes out a bridge and after six months can’t sell it, they shouldn’t look at keeping it for another six months. They should look to flip it into a buy-to-let or if they want to keep it, a longer-term bridge might be useful.

“But as a set rule bridging is supposed to be a short-term solution and there’s innovative ways you can look to meet the client’s needs without necessarily sitting on an 18-month bridge.”

By Michael Lloyd

Source: Mortgage Introducer

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Bridging finance industry is buoyant according to new survey

The bridging finance industry is in promising shape and continues to flourish. That’s the conclusion of Gareth Lewis, commercial director at MT Finance (mtf) after a new survey showed a spike in demand.

The desire for bridging loans increased in the third quarter of 2018, despite the traditional summer slowdown, according to the latest Broker Sentiment Survey conducted by bridging lender mtf.

Demand for bridging finance grew in the third quarter of 2018, with 48 per cent of brokers experiencing a rise in bridging loan volume, up from 38 per cent in the second quarter of 2018. And just 17 per cent of brokers did not experience a rise in bridging loan volume in Q3 2018.

Feedback from brokers points to a strong need for specialist lending but the geographical spread of bridging loan demand narrowed in the third quarter the year, with demand in the North West, South West and Scotland dropping from the previous quarter.

The South East saw the biggest demand for bridging loans in the UK at 48 per cent, up from 30 per cent in Q2. The second highest area of demand was London, at 41 per cent.

For the third consecutive quarter, funding development projects was the most popular reason for taking out a bridging loan at 31 per cent. Business purposes was the second most popular reason at 21 per cent, up from 16 per cent in the second quarter of 2018.

However, 66 per cent of brokers said the bridging loan process is longer than it was 12 months ago, while the majority, some 48 per cent, suggesting three to four weeks was the average length to complete a bridging loan. Meanwhile, some 21 per cent indicated that bridging loan cases generally took two to three weeks to complete. Of 113 brokers polled, 61 per cent blamed solicitors as the main reason for delays, followed by the valuer at 16 per cent.

And Lewis said: “The bridging finance industry is in promising shape and demand continues to grow, particularly from property investors looking to fund development projects in London and the South East.

“However, speed has always been a vital element in bridging finance and it is essential we don’t lose sight of this. It is important that all parties involved- the lender, lawyer, valuer and the broker, move swiftly to complete to the borrower’s schedule.

“It is important we stay true to the fundamentals of bridging: providing borrowers with fast access to the capital they need in a responsible and sustainable way and not fall in to the more traditional computer banking model.”

Source: Bridging Directory

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Bridging loan volume soars in Q1

Bridging lending reached £154.02m in Q1 2018, up almost a third compared to £118.79m for the same period last year, Bridging Trends data found.

This is the highest volume recorded since Bridging Trends launched in 2015, almost doubling £80.47m of lending during Q1 2015. Prior to Q1 2018, volume peaked at £150.07m during the second quarter of 2017.

Alan Dring, consultant at Hope Capital, said: “It’s a healthy trend that’s continuing, is good to hear and is encouraging for rest of the year. The first quarter was frustrated by bad weather but the confidence is still there and these figures are a good relfection of a confident, active sector.

“However service levels for bigger lenders are being jeopardised by appetites for more business at higher LTVs and lower rates, chasing the market and not necessarily quality and as a consequence these figures could be influenced by poor service levels.

“These figures don’t surprise me, they encourage me. Hopes’s figures in second quarter will be better than first which was our record.

“They’re gaining opportunity on the back of diminishing service levels of larger lenders who could be accused of getting greedy in a market steadily increasing. There’s every reason to be optimistic if you get your model right.

“The figures are also down to education with brokers becoming more knowledgable and aware of opportunities.”

The average term of a bridging loan was 11 months during the second quarter, down from 12 months in the previous quarter.

For the third consecutive quarter, mortgage delays were the most popular reason for obtaining a bridging loan, accounting for 24% of all lending.

For the first time, auction purchases were the second most popular reason for getting a bridging loan at 20% – up from 4% during the same quarter last year, as an increasing number of people benefitted from fast access to capital.

Refurbishment was the third most popular reason for obtaining a bridging loan during the first quarter at 18%.

A completion time of 48 days during Q1 2018 was lower than an average completion time of 50 days during Q1 2017.

The average term of a bridging loan was 11 months during the second quarter, down from 12 months in the previous quarter.

Average monthly interest rates remained at 0.83% for the second consecutive quarter and were 0.83% during the same quarter in 2017. Average LTV levels increased to 49.1% in Q1 2018, from 46.2% during the Q1 2017.

Regulated bridging loans increased for the first time since Q1 2017, with the number of regulated loans conducted by contributors increasing to 43.7% in Q1 2018, compared to 42.6% during Q4 2017.

First legal charge lending increased to 83.7% of all loans during Q1 2018, up from 80.3% in the fourth quarter. Meanwhile, second charge loans increased to 16.3% compared to 13.4% during Q1 2017.

Joshua Elash, director of bridging finance lender, mtf, said: “It is particularly interesting that pricing has remained stable, despite an increase in regulated lending. This suggests that the recent downward pressure on rates might be easing and in the unregulated space, going the opposite way.

“Also, particularly interesting is the increase in bridging loans for auction purchases, considering the otherwise quiet property market, where transactional volumes have been adversely impacted by recent changes to buy-to-let income tax treatment and exorbitant increases in stamp duty.”

Tomer Aboody, director of bridging finance lender mtf, said: “Bridging volume has peaked to its highest level as the product becomes an increasingly mainstream financial tool.

“This is good news for borrowers that are able to access fast and vast pools of capital to fulfil their short-term funding needs as well as a growing number of investors attracted to the space.”

Source: Mortgage Introducer

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Will the bridging boom continue?

House price growth is slowing in many areas across the UK and many developers and investors are choosing to boost the value of their property portfolios by carrying out repairs and refurbishments. As a result, we are seeing a boom in bridging finance, but will this continue and what does the future bridging landscape look like?

With Brexit looming large on the horizon, we recognise that there may be challenges ahead due to ongoing economic and political uncertainty. However, from our perspective, we are confident that the bridging market will continue to flourish. Indeed, this confidence is reflected by research from the Association of Short Term Lenders, which found that 78% of its members expect their business to grow, with almost all (93%) identifying the provision of short-term finance to SME housebuilders as a growth area.

We remain optimistic in the bridging sector in both the short and longer term. According to our SME Growth Watch research, the number of SMEs in the construction of domestic building sector has grown by 38% in the past five years, while the number of smaller firms in the renting and operating real estate sector – which includes buy-to-let – has risen by 16% over the same time period. This is positive news for the future of bridging as – with mortgages approvals taking longer – we believe developers and investors will increasingly look to short-term finance solutions to make the most of opportunities as they arise.

Regulatory changes are also set to lead to increased demand for bridging finance. From 1st April, government guidelines stipulate that “landlords of privately rented domestic and non-domestic property in England or Wales must ensure that their properties reach at least an energy performance certificate (EPC) rating of E before granting a new tenancy to new or existing tenants”. Properties that do not comply with these standards could require renovations and improvements and this is where bridging can help, enabling landlords and investors to get access to finance and make changes relatively quickly. The new EPC regulations will be rolled out to non-domestic properties from 1st April 2023, again providing another opportunity for the sector.

With house price growth slowing and regulatory and tax changes impacting margins in the buy-to-let sector, in particular, developers and investors are adding value to their properties by carrying out improvements. While there are a number of finance options available to carry out work of this kind, bridging is an attractive option for many, with lenders in this sector, including ourselves, providing levels of flexibility and speed of service that cannot be replicated by the high street banks. We believe the future of bridging will continue to be bright.

Source: Bridging and Commercial

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Bridging finance regarded as well established in British mortgage market

Bridging lenders in the UK are positive about the future with the majority expecting this sector of the mortgage industry to grow, according to a new sentiment survey.

The upbeat outlook from members of the Association of Short Term Lenders (ASTL) suggests that the use of bridging loans as a financial tool for property transactions is well established.

Some 78% of members expect their business turnover to grow and 63% are expecting the same of the bridging finance sector as a whole. In addition, they are very positive about the prospects of providing short term finance to SME house builders with 93% believing that this is a growth area.

However, members are slightly less sanguine about the long term future prospects of the UK economy, positivity has decreased from 50% in December 2017 to 43%. No less than 52% are unsure and only 11% are negative.

The survey report says that this is likely due to the protracted nature of the Brexit negotiations combined with the rise in inflation which in turn is likely to lead to higher interest rates.

Members are split about the direction of property prices, with 52% expecting slight growth and 48% expecting prices to fall. They are lukewarm about the potential impact of the Spring Statement, with 48% neutral and 19% negative.

‘Whilst I remain cautious about future prospects for the UK in a very uncertain world, in which the economic climate can change overnight, members are confident that they will continue to prosper,’ said Benson Hersch, ASTL chief executive officer.

‘The use of bridging as a financial tool, both for property transactions and for other business purposes is now well-established,’ he added.

Source: Property Wire

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Bridging lending crashes through the £3bn mark

Annual bridging lending completions rose by 24.6% to over £3.5bn in 2017, ASTL figures show.

Bridging completions for ASTL members in the fourth quarter of 2017 exceeded £1bn, an increase of 31.7%.

Benson Hersch, chief executive of the ASTL said: “Our figures highlight that, despite ongoing concerns relating to Brexit and the property sector, the bridging finance industry remains in good shape and is ready and willing to meet the challenges that 2018 may bring.

“The bridging sector continues to provide a vital role in the economy by offering customers access to the capital they need in a responsible and sustainable way.   It continues to be an important part of the alternative finance market.”

The size of members’ loan books is also healthy. Total loan books are continuing to climb, with a rise of 4.6% compared to Q3 2017. Compared to the end of Q4 2016, the value of loan books has risen by 12.9%, to £3.7bn.

These figures are taken from the responses from ASTL members, which include most of the key lenders in the bridging market.

Source: Mortgage Introducer

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Bridging lending rises 10.7% in 2017

Bridging loan volumes rose 10.7% to £534.1m in 2017, according to the latest Bridging Trends data from mtf, Brightstar Financial, Enness, Positive Lending and SPF Short Term Finance.

£118.79m of bridging loans were completed by Bridging Trends contributors in the first quarter, before soaring to £150.7m in the second quarter – the highest level of loans transacted by contributors in a single quarter since Bridging Trends launched in 2015.

Volume cooled slightly in the second half of the year, dropping to £142.75m in Q3 and to £122.49m in Q4.

Regulated bridging loans increased market share on previous years to an average of 46% in 2017, compared to 44% in 2016 and 36.6% in 2015. Regulated bridging loan activity outperformed unregulated bridging loans for the first time in the first quarter of 2017.

Average loan-to-value levels dropped to 46.6% in 2017, down from 49% in 2016, while average monthly interest rates remained consistent throughout the year at 0.83%, dropping slightly from 0.85% in 2016 and 0.91% in 2015.

Average loan terms remained consistent in 2017 at 12 months- up from 11 months in 2016. Average completion times averaged 43 days in 2017, down from 45 days in 2016.

Mortgage delays were again the most popular reason for clients taking out a bridging loan in 2017- at 29% of all lending, although this was a reduction from 2016 when they accounted for 34% of activity.

Joshua Elash, director of mtf, commented: “The continued growth in lending volume in this sector, as reflected by the data reported by the contributing parties over the year, evidences the extent to which bridging finance is now increasingly a mainstream financial solution.

“It is interesting to note the what appears to be a direct correlation between the data reported and the macro-economic and regulatory changes which have impacted upon the market. We have, for example, in this annual reporting cycle, seen regulated bridging finance lending outstrip unregulated bridging finance for the first time. This follows on from the implementation of the mortgage credit directive and the consequential introduction of a new class of regulated “consumer” buy to let lending.

“Equally we are interested to note that again for the first time since reporting began, refurbishment to existing investment property was the most popular reason for borrowing during Q2 of last year. This follows on from increases in the stamp duty taxes payable on the acquisition of new buy-to-let properties and indicates a potential strategy shift amongst professional property investors towards value enhancement.

“As we look ahead to the year 2018 we are interested to see how these two trends in particular pan out.  In the interim and what remains certain is that bridging finance as a financial solution continues to go from strength to strength.”

Chris Whitney, Senior Broker at Enness Commercial, said: “Between stamp duty costs and stagnation in the London property market, it’s no wonder bridging finance for refurbishment is becoming increasingly popular. To avoid heft stamp duty charges, many more clients have been buying cheaper or outdated properties, and using second charge bridging finance to update them before refinancing onto a residential product. Likewise, we’ve seen numerous client looks to raise money against their properties who do not want to refinance altogether. As such, they’re using regulated bridges as second charges against their property, in order to keep their attractive first charge mortgage whilst securing the extra funds they need.

“Encouraging to see an overall increase in the total amount of bridging originated by the contributors to Bridging Trends, indicating a strong and resilient bridging sector that can survive what was a tough year with numerous obstacles to overcome, including MCD, PRA and tax changes for BTL/second properties and not least the long-drawn out Brexit negotiations.”

Kit Thompson, Director of Short Term Lending & Development at Brightstar, added: “Our business has seen a large increase in bridging for property refurbishment, with an increase in PDR schemes and change of use projects. In fact, with the exception of our FCA regulated bridging, which by contrast doesn’t generally involve refurbishment, almost all of our non-regulated bridging loans here at Brightstar involved some element of refurbishment, whether just light refurbs or those projects involving change of use and planning consent.”

Source: Financial Reporter

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UK bridging finance hits pre-Brexit high

Bridging finance provider West One’s latest index, released on Tuesday, showed that gross annualised lending increased from £4.3bn in the second quarter to £4.7bn – exceeding 2016’s pre-EU referendum high of £4.4bn.

UK BRIDGING lending rose to a pre-referendum high of £4.7bn in the third quarter, according to new research.

The index, which uses the company’s data as well as statistics published by the Association of Bridging Professionals and other UK bridging loan providers, also found that the emerging trend of smaller transaction sizes had continued into the third quarter.

Average loan sizes within the bridging finance sector dropped below £600,000, compared to averages above £900,000 at the same time last year.

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This reflects the relatively depressed market for high-end properties with values over £1m, particularly in London, West One said.

However, there has been a large volume of smaller transactions, meaning that total lending held up well in the third quarter as the figures show.

West One predicts a further rise in bridging rates in the fourth quarter, although the sector remains highly competitive.

Read more: Funding Circle borrowers back joining European Free Trade Agreement post-Brexit

“The bridging sector has performed well during the third quarter, despite the backdrop of concern around the progress of Brexit negotiations, and economic indicators pointing to both a slower economy and to the interest rate rise that ultimately came in November,” said Danny Waters, chief executive of West One’s parent company Enra Group.

“Whatever happens next, the industry must continue to adapt to conditions, and provide the diverse and flexible funding options that property professionals need, so they can take advantage of the changing, regional landscape that we are seeing develop.”

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Source: P2P Finance News