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£4.94bn Lent Via Bridging Loan Completions in 2022

New market analysis has shown that £4.94bn was lent via bridging loan completions in 2022, a 17.6% annual increase and a figure that is expected to rise further to £5.59bn annually by 2025.

Bridging finance specialists analysed bridging market trends based on data from the Association of Short Term Lenders, looking at how the homebuyer reliance on bridging has grown since 2019 as well as forecasting how the bridging sector will fare over the next few years.

The figures show that a total of £4.94bn was lent via bridging loans in 2022, a 17.6% annual increase when compared to the £4.2bn in bridging loans completed in 2021.

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This figure also sits 24% higher than the pre-pandemic market in 2019 when £3.99bn was lent via bridging loans.

Additional analysis of bridging trends data shows that investment purchases were the primary reason for bridging market activity, accounting for 23% of all loans issued.

Chain breaks also accounted for a sizeable sum of lending, stated as the reason behind 20% of all bridging loans.

Heavy refurbishment (13%), unregulated finance (11%) and business purposes (9%) also featured within the top 5 reasons behind bridging loan market activity in 2022.

Based on current trends, it’s also forecast that bridging market activity is expected to increase over the coming years, climbing by 2.4% this year, with total lending expected to hit £5.59bn annually by 2025.

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Chris Hodgkinson, Managing Director of Apex Bridging, the bridging finance specialists responsible for the analysis, commented:

“With the exception of the market dip seen in 2020 due to initial pandemic market restrictions, the bridging sector has gone from strength to strength in recent years and we’re now seeing considerably more lent via bridging loans on an annual basis, even when compared to the pre-pandemic market in 2019.

There’s a common misconception that bridging is really only utilised in times of crisis in order to save a transaction from collapse and while this is certainly the case to some extent, it’s far from the only reason that many buyers and investors utilise bridging loans.

The sector is utilised by a range of buyers and investors for a myriad of reasons and as the traditional mortgage lending space becomes increasingly more difficult, not to mention expensive, we expect to see the reliance on bridging loans continue to increase over the next few years.”

Source: Property Notify

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How to Work Out The Cost of a Bridging Loan

First of all, what is a Bridging Loan?

A bridging loan is a short-term loan designed to provide temporary financing for a specific purpose, such as buying a property before selling an existing one. Bridging loans are typically secured against property and can be used for a variety of purposes, including property development, auction purchases, and refinancing.

Bridging loans are often used when a gap in funding is needed and the funds from a sale or longer-term loan are not yet available. They can provide a fast and flexible source of financing and are typically easier to obtain than other types of loans.

Bridging loans have higher interest rates and fees compared to traditional loans, as they are seen as a higher risk. The loan term is usually between 1 to 18 months and the interest is usually rolled up and paid back at the end of the loan term.

To be eligible for a bridging loan, you typically need to have a good credit history and sufficient equity in a property to use as collateral. Lenders will also consider the reason for the loan and the borrower’s exit strategy, as they need to be assured that the loan can be repaid.

In summary, a bridging loan is a short-term loan designed to provide temporary financing for a specific purpose. They are typically secured against property and used when a gap in funding is needed. Bridging loans have higher interest rates and fees compared to traditional loans and are usually easier to obtain. To be eligible for a bridging loan, you need to have a good credit history, sufficient equity in a property and a clear exit strategy.

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The cost of a bridging loan is determined by several factors, including:

Loan amount: The larger the loan amount, the higher the cost.

Loan to value (LTV) ratio: The LTV ratio is the amount of the loan compared to the value of the property being used as collateral. A higher LTV ratio typically means a higher cost for the loan.

Interest rate: Bridging loans typically have higher interest rates than other types of loans and the rate can vary depending on the lender and the loan terms.

Term: The length of the loan term can affect the cost, with shorter terms often resulting in higher interest rates.

Repayment method: Bridging loans can be structured with interest only or capital and interest repayment methods, with the latter typically being more expensive.

Arrangement fees: Lenders often charge arrangement fees to cover the costs of setting up the loan. These fees can add significantly to the overall cost of the loan.

Exit fees: Some lenders may also charge exit fees when the loan is repaid, which can add to the overall cost.

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To calculate the cost of a bridging loan, you first need to determine the loan amount, interest rate and term. You can then use an online calculator or work with a broker to estimate the monthly repayments based on these factors.

It’s important to remember that bridging loans are typically short-term loans designed to provide temporary financing for a specific purpose, such as purchasing a property before selling an existing one. As such, they often carry higher interest rates and fees than other types of loans and it’s crucial to carefully consider the total cost and repayment terms before proceeding.

In summary, the cost of a bridging loan depends on several factors including the loan amount, LTV ratio, interest rate, term, repayment method, arrangement fees and exit fees. It’s important to carefully consider these factors and to work with a broker or use an online calculator to estimate the total cost of the loan before proceeding.

Source: Bdaily News

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In these times of high interest rates, a bridging loan is a good option

Mike Collins Mortgage Expert and independent financial advisor, explains what Bridging Loans are and how they could be used in current times. Bridging loans offer interest-only loans. They are typically taken out for people who need funds quickly. It is basically a bridge that allows for credit to become available between incoming debt and existing credit.

If you are in need of a quick-term lifeline, it can help you purchase property directly or at auction, complete renovations, and do any other work that is needed.

Mike Collins Mortgage expert, an experienced financial planner, shared his 17-year experience. Homebuyers are losing two out of five property purchases due mortgage delays. It is crucial that they can move quickly – and they have the option to do that using a bridging loan.

“The simple answer to this question is that a loan bridging a gap is paid back in a short time, which allows the interest to be more easily managed and makes the loan more affordable. Below are some details about bridging lenders and the reasons they can be helpful in this current economic climate.

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Rates for Bridging Loan Interest
These can be fixed. Stability can be achieved if you can pay the agreed-upon repayments. Variable interest rates will change in accordance to the Bank of England Base Rate, which currently stands at 2.25% (Sept.2022).

The rate you pay will determine the amount of your monthly repayments.

Rates can vary depending upon what you want to use the loan for. Bridging loans on land or business bridging loan rates are generally more expensive than one for residential purchases.

Buyer demand for homes is very high. This increases the demand for bridging loans and delays in the purchasing process.

It is important that you realize that interest rates are charged on a monthly schedule when looking at them. This is because terms usually last only 9-12months.

Cash available quickly
Bridging loans, which are easier to arrange than secured or mortgage-type loans, are more efficient if time is of the essence.

Funds can often be released in just three days. Bridging loans are a great alternative to the competition.

It is quicker to arrange because the lending decision tends depend on your exit strategies. The strategy you have for paying the loan back at the end of the term.

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If you have bad credit, it is possible to get one
Your credit score is an important factor in determining whether you are eligible for a loan. It can also affect the rate of interest or other fees you may have to pay.

Even if you have bad credit, it’s possible to get one. The lenders will tend to be more concerned with the property than your credit score when determining the rate.

There are no long checks because the loan is secured against assets of value.

Help to fix broken chains
Recent research found that 1/5 applicants needed a Bridging Loan because they were part a chain that was broken. This delayed their purchasing timeline and made it necessary to get a short-term loan to cover the gap.

Bridging loans could be a way to still make a sale. Currently, the average completion time takes four months.

The current rise in interest rates may lead to a fall in buyer demand. Bridging loans could also be affected by this drop. But loans like this could be lifelines to many buyers, property owners, and others.

Whatever bridging lender you choose make sure they’re a member the Financial Conduct Authority. This means that any complaints, especially when it concerns large sums of cash, can be handled according to FCA guidelines.


Source: News Anyway

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Investment purchases drive jump in bridging loan lending 

The total value of bridging loan lending has increased by 22 per cent in the past year, driven by the purchase of investment properties.

A market analysis by Henry Dannell showed that investment property purchases were the most common reason for taking out a bridging loan, accounting for 24 per cent of all loans this quarter.

But Henry Dannell director, Geoff Garrett said the increase does not signify that people are struggling financially.

“An increase in bridging loan totals indicates that the systems in place are struggling to keep up with demand and can’t match the desired pace of buyers and sellers,” Garrett said.

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“The housing market, for example, is moving more slowly than it did a year ago, even two and three years ago. At the same time, buyer demand is extraordinarily high and activity is through the roof.

“This causes delays in the conveyancing and buying process which, in turn, increases the need for bridging loans.”

The past quarter alone has seen bridging loans grow by 13.8 per cent to £178.4mn, up from £156.8mn in the first quarter of the year.

However these increases leave lending totals 1.4 per cent behind pre-pandemic figures, with total lending sitting at £180.9mn in the final quarter of 2019.

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Broken chains
The mortgage broker’s analysis also showed that 21 per cent of applicants needed the loan because they were part of a chain that has been broken, which pushed their expected purchasing timeline off track and created a need for a short term loan to tide them over.

Completion times in the UK are currently at a high point, taking an average of 57 days to get a sale over the line and contracts signed.

This is four days longer than the typical waiting time last quarter and 10 days longer than this time last year, according to Henry Dannell.

In addition, 13 per cent of loans were given to people who need the money in order to make significant refurbishments to a property, such as an extension.

Despite the increase this quarter, Garrett is of the view that because of cost of living pressures and the pace of interest rate rises there will a drop in buyer demand and as a result a decline in bridge financing over the next year or so.

A bridging loan is a short-term loan, typically taken out for up to 12 months but often for a shorter duration.

It is designed to allow a buyer to proceed with an acquisition without the need of selling an existing asset either in advance or concurrently.

In most cases, it will be either replaced by a long-term mortgage facility or repaid from the proceeds of a sale.

By Jane Matthews

Source: FT Adviser

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£50m funding line secured for Wilmslow bridging lending firm

MS Lending Group, the Wilmslow-based bridging lending firm, has secured an initial £50m senior-secured facility with Pollen Street Capital.

London-based alternative investment asset manager, Pollen Street Capital, invests in credit and private equity strategies, focusing on real estate, financial, and business service sectors.

Michael Stratton, CEO and founder of MS Lending Group, said: “This partnership with Pollen Street further boosts MS Lending Group’s ability to provide finance and funding solutions across the market.

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“The injection of funds means we can remain agile in the market – not only with speed and ease for our customers, but also the hands-on, hassle-free service which is what we’re known for.

“With uncertainty around interest rates increasing, this is a huge statement from us as a lender to show our customers and brokers they can rely on us, knowing the security of our funding partners and that we have a fixed facility in place.”

He added: “It has been refreshing to work with like-minded individuals at Pollen Street who understand and support our business ambitions and growth plans, plus it’s a huge credit to the MS team that we’re at this stage after only 18 months of trading. We are really looking forward to a long and successful partnership with Pollen Street.”

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MS Lending Group have financed more than £55m since it began trading in January 2021, with in excess of half of that lent in the first half of 2022.

Ben Jackson, investment manager at Pollen Street Capital, said: “Our real estate strategy is built on selective partnerships with real estate lending platforms.

“This new facility with MS Lending Group fits well with our strategy and our aims to maintain liquidity in the short term bridge lending market. We are thrilled to be working with Michael Stratton and Robert Goodall who bring over 40 years’ experience in the industry to MS Lending Group.”

By Neil Hodgson

Source: The Business Desk

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UK bridging sector set for post-Covid rebound

The UK bridging sector is in rude health, and confidence is high for 2022, according to a recent survey of brokers undertaken by Glenhawk, with 84% of respondents saying that they expect to write more bridging business in 2022 than in 2021. Reflecting the defensive appeal of real estate as an asset class and the favorable sectoral headwinds experienced last year, just 14% of brokers wrote less bridging business in 2021 than 2020.

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Despite 74% of brokers believing that Permitted Development will enable them to arrange more bridging cases, borrowers have been slow to embrace the 2021 changes to PD rights, reflecting a lack of understanding in the market as to the opportunity it presents. Nearly three quarters of brokers said that either less than 25% of their landlord clients (43%), or none (26%), have asked for them to arrange bridging finance relating to PD. Over half of respondents (54%) cited a lack of suitable properties as the main obstacle for this lack of demand, followed by fluctuating valuations and access to finance.

The survey also reveals that lenders are continuing to exercise caution, with 60% of brokers citing the placement of higher Loan to Value cases as their biggest challenge, followed by securing finance for foreign nationals (37%). 

Nick Hilton, Glenhawk Managing Director, commented: “Building on what was a remarkably robust 2021, buoyed by changing consumer behaviour, supportive government stimulus and a low interest rate environment, expectations are high for 2022. These findings align with the exceptionally high levels of enquiries we have generated so far this year, with the market opportunity as Covid-19 fades into the distance set to grow considerably this year.

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“At the same time, there remain challenges, noticeably the continued need for lenders to simplify and increase transparency for the borrower process, whilst more highly leveraged schemes will remain out of favour, especially if recent global events take on a more urgent focus. Furthermore, despite the welcome changes to Permitted Development last year and optimism about its potential, huge swathes of the market remain unaware of the opportunity, so there is a signficant education piece to be undertaken in the coming months.”

Other findings include:

  • There is significant capacity amongst brokers for more business, with just 14% saying that they had turned away more bridging cases in the last 12 months compared with 57% who could place more
  • For borrowers and brokers new to the market, how interest is calculated / repayment terms is the most confusing area (49%), followed by the legal process (39%) and the application process (32%).

The findings resulted from a series of webinars hosted for brokers by Glenhawk, the fast-growing UK challenger lender, in February 2022.

By Nathan Spencer

Source: Built Environment Networking

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Bridging Sector Set for Strong Performance in 2022

Two years of economic turbulence have forced the UK public and its business community to rethink its priorities. Not to mention, the lending options available when looking to secure cost-effective funding for a wide variety of projects.

Interestingly, one area of the UK’s lending market that has flourished throughout the pandemic is the bridging finance sector. Bridging loans specialists and lenders collectively enjoyed an extremely robust 2021, and the same is now predicted for the year ahead in 2022.

According to the latest figures from West One, the lender’s bridging division saw its most prosperous year on record in 2021. Gross bridging loan completions were up a full 32% (reaching £485 million) during the first six months of last year, increasing further to an impressive 52% by November.

All of which could pave the way for further record-breaking performance in 2022, so states the lender.

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Housing Sector Remains a Key Driver

The UK’s housing market remains a hive of activity, as property prices continue to skyrocket and mortgage rates remain close to record lows. In addition, new and established developers across the country are setting their sights on increasingly ambitious property conversions, transforming commercial and semi-commercial properties into homes.

Experts believe that demand for larger bridging loans – sums in excess of £1 million – will grow considerably over the course of the next 12 months.

Others have cited growing demand for affordable finance for property renovations as improvements as a key driver for the bridging sector. With more people spending more time at home than ever before, more money is being spent on making our homes pleasant and functional places to reside, and this is where bridging finance has proved ever popular as a funding option.

The materials and labour shortages that blighted the sector in 2021 are showing signs of improvement. This could subsequently lead to a major spike in property development and renovation activity, as it becomes increasingly affordable to plan and complete ambitious projects.

House Prices Set to Soften

While there may be no signs of the UK housing bubble bursting in the near future, the gradual softening of house prices is inevitable at some stage. Something that could motivate more buy-to-let landlords to expand or diversify their investment portfolios, as the property investment cost becomes less prohibitive.

This is also a sector where bridging finance has proved particularly popular over recent years. Bridging finance enables new and established landlords to purchase properties at auction for less than their true market values, conduct the necessary improvements and let them out to generate profits.

Or perhaps, sell the properties on to generate significant short-term revenues.

In all instances, the bridging sector will continue to cater to those looking for fast-access finance at competitive rates. In particular, borrowers with adverse credit or a history of financial issues are likely to find the bridging loan sector far more flexible and accommodating than the traditional High Street approach.


Source: News Anyway

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Bridging applications reached record high in Q3

Bridging applications reached a record high of £7.72bn in the quarter ending September 2021, an increase of 4.9% on the previous quarter, according to the latest ASTL data.

While the value of completions in Q3 2021 dropped by 6.1% on Q2, completions still totalled £1.0bn in the quarter, meaning that the value of loan books now stands at more than £5bn for the first time.

The data shows that the value of loan books was £5.07bn at the end of September, representing an increase of 6.8% on the previous quarter and a jump of 11.1% on the same quarter last year.

According to the data, average loan-to-values (LTVs) continued to hold at 59.8% in Q2 and the value of loans in default fell for the third consecutive quarter, showing a decrease of 4.1% over Q1 and a fall of 3.6% on the same quarter last year.

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Vic Jannels, chief executive of the ASTL, said: “The Q3 2021 lending figures continue to paint a picture of a market that is enjoying strong growth whilst maintaining a robust approach to risk, with applications increasing and loan books topping £5bn for the first time, at the same time as defaults falling for the third consecutive quarter and LTVs remaining stable.

“From experience, we know that more brokers are engaging with the bridging market and analysis of our data shows growth across different elements of short term lending, including development finance and second charge bridging.

“It’s clear that bridging is becoming more established as an invaluable piece of a broker’s toolbox for a range of purposes. We would always recommend that ASTL lenders continue to represent a benchmark of quality and customer focus, for those brokers.”

By Jake Carter

Source: Mortgage Introducer

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Bridging lending hits over £190m in third quarter

Bridging lending has returned to the highest levels seen since 2018, according to data from more than a dozen packagers in the sector.

Gross lending by contributors to the survey hit £190.24m in the third quarter of this year, which is the highest volume recorded since Q4 2018.

Lending was up by 30% on £146.52m the previous quarter and by 65% on £115.52m in Q3 2020.

Contributors attributed the growth to strong housing market activity ahead of the tapering down of the stamp duty holiday.

It represents the highest volume seen since £201.57m in the final quarter of 2018.

The research combines bridging loan completions from several specialist finance packagers.

For the second consecutive quarter the purchase of an investment property was the most popular use for a bridging loan, at 28% of total contributor transactions – up from 24% in Q2.

A traditional chain break was the second most popular use at 13%, a drop from 20% in Q2.

Meanwhile, demand for auction finance surged from 4% in Q2 to 11% in Q3.

First charge bridging loan transactions remained unchanged from the previous quarter, accounting for 90% of total market volume in Q3.

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Regulated bridging loans transacted by contributors decreased market share for the fifth consecutive quarter – falling to 37.7%, from 41.6% in Q2.

The average LTV jumped to 60.2%, up from 54.9% LTV in Q2 – this is the highest average LTV ever recorded since Bridging Trends launched in 2015. This illustrates that borrowers are maximising liquidity opportunities and taking advantage of low rates to leverage more than before.

Demand for higher LTV products was also a sentiment reflected in data provided by Knowledge Bank, which reported the top criteria search made by bridging finance brokers on their system in Q3 was “maximum LTV”.

The average monthly interest rate in Q3 2021 was 0.72%, down from 0.79% in Q2, highlighting the large levels of liquidity in a continually competitive space.

The average term of a bridging loan in Q3 fell from 12 months to 11. Bridging loan processing times returned to Q1’s record high of 53 days, up from 47 days in the previous quarter.

Stephen Burns says: “The most exciting part to read is ‘returns to’ when referring to activity levels.

“It shows the industry was affected by the disruption the Coronavirus pandemic put the country through, but more so, how it has pulled back quickly, and we are now firing on all cylinders.”

Dale Jannels says: “These figures show that bridging finance is now a better understood product for many brokers and they have much more confidence in recommending this solution to their customers.

“The stamp duty holiday has helped bridging finance to be more widely accepted by the mainstream industry as a need to meet speed demands, but investors with the intention to renovate have also been at the forefront of recent requests.”

Chris Whitney says: “Bridging Trends is a great concept and is fantastic at letting the industry know where the key indicators are heading and over the years, we have seen how micro and macro factors, such as Brexit, have impacted upon us.

“However, with the news that contributor gross bridging loans are over £190m it makes me wonder how big this market really is in its entirety.

“LTVs are up with borrowers possibly taking advantage of increasingly cheaper money in the light of reports that mortgage rates in general are heading upwards imminently.

“However, with continuing competition and even more new entrants in the short-term lending space, it will be interesting to see how that pans out with so many lenders looking to increase market share in a seemingly very liquid environment.

“However, at 60% LTV I think we are still seeing prudent levels of borrowing by people and responsible lending from the funders.

“I was not surprised to see processing times up.

“With increased volumes I think we have seen things take longer, with many lenders struggling to recruit good underwriters and valuers stretched to the limit.

“With the highest use of funds being for investment purchase I think it really shows how much confidence people have in UK real estate.”

Chris Oatway says: “It surprises me that the average LTV is at record high levels at just 60%.

“In general, we have seen considerable demand for higher leverage deals at 70% to 75% LTV, where clients keep as much equity in their back pockets for future investments.”

By Leah Milner

Source: Mortgage Finance Gazette

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Bridging loan completions rise as lockdown restrictions ease: ASTL

Bridging loan completions jumped by more than a fifth to £1.1bn in the second quarter of the year reflecting the easing of lockdown restrictions, says the Association of Short-Term Lenders.

Short-term lending lifted by 23.3% compared to the previous three months, driven by rising completions and fewer defaults.

Bridging loan books reflect the increase in completions and now stand at over £4.7bn, the ASTL’s audited data reports.

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Loan applications in the quarter slipped by 1.7% to £7.36bn, compared to the previous three months, but for the year to the end of June were still 26.9% higher than applications in the year to the end of June 2020.

Average loan-to-value ratios showed a small increase since the March 2021 quarter and now stand at 59.8%.

The association says the value of loans fell by 7.6% compared to the first three months of the year, with the number of repossessions was also down in the second quarter, “suggesting the continued easing of coronavirus restrictions is having a positive effect”.

ASTL chief executive Vic Jannels says: “The second quarter 2021 lending figures are pleasing for a number of reasons.

“Not only is the market continuing to grow and show signs of ongoing recovery as we emerge from the pandemic, but the increase in completions also represents improving conversion rates, which is good news for brokers, lenders and customers.

“The falling value of loans in default and number of repossessions also reflect the quality of lending and shows that the market is continuing to grow in a sustainable way and enhance its ever-improving reputation.”

By Roger Baird

Source: Mortgage Finance Gazette

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