The mortgage bridging industry is expected to set new records in 2014 with brokers expecting lending to rise by a third and hit £2.7 billion.
Intermediaries expect even lower rates on bridging loans in the New Year, according to a survey of over 250 financial intermediaries by West One Loans.
This represents annual growth of 33% on the gross lending of £1.93 billion in the 12 months to the beginning of November and will be more than three times greater than total lending in 2011 when gross bridging lending totalled £0.91 billion.
‘Bridging loans provide crucial support for credit worthy borrowers and great ideas. In a warming economic climate, that support is vital for growth. Bridging has grown up over the course of the recession just as most mainstream lenders have wandered into troubled waters,’ said Duncan Kreeger, director at West One Loans.
‘Now that the economy is picking up, all forms of alternative finance are steaming ahead and bridging in particular is making the most of the competitive advantage won in the dark days of recession,’ he explained.
‘Looking at the figures so far this year, brokers’ expectations are looking pretty spot on. And 2014 looks particularly exciting given how accurate the same predictions from intermediaries were a year ago,’ he added.
When it comes to Loan to Value ratios brokers expect them to rise in 2014. The net proportion of those expecting higher LTVs, minus those expecting lower LTVs, has hit a record high with a net 38% expecting higher loan to value bridging loans. The latest West One Bridging Index shows average LTV currently stand at 42.8%.
Kreeger said that higher LTVs will allow bridging lenders to lend on more ambitious projects. He pointed out that bridging loan sizes have already doubled on average since 2010 but most recently LTVs have been falling as property has risen in value.
‘That has left plenty of capacity for larger loans, which will be realised over the next 12 months. This expectation confirms that loans will keep growing next year, making more use of increasingly valuable security. Larger loans are particularly great news for the biggest deals in both the property and small business markets, which rely on rapid access to considerable finance,’ he added.
The survey also found that bridging interest rates are expected to fall over the course of 2014. A net proportion of brokers expect lower rates in 12 months’ time compared to prevailing conditions in November. This comes as the latest West One Bridging Index shows rates averaged 1.22% in the year to 1st November, down from 1.38% in the previous 12 months.
However, in line with wider financial conditions, expectations for bridging interest rates have revealed a turning point. A net 27% of brokers expecting lower bridging product rates in November compares with a net 49% expecting rates to continue falling in March. November’s figure represents the slimmest majority of brokers expecting lower rates for one year.
‘For around half the price of borrowing on credit...