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The annual growth in gross bridging lending in 2013 jumped by 27 per cent to £2 billion, up from £1.57 billion in 2012, according to the West One Bridging Index.
In the two month period from 1st November to 1st January 2014, industry gross bridging lending was £419 million, up 5.5 per cent from £397 million in the previous two months. On a one month basis it was up 3.3 per cent.
If lending continued at this rate for a year, gross lending in the next twelve months would be £2.51 billion per year.
Duncan Kreeger of West One Bridging commented: “Economic progress feels more solid by the week, and it’s branching out across every area of business. By securing vital projects against property, firms and individuals stand to make the most from a year of great opportunity.
“Bridging has grown up from the industry it once was, and it’s still evolving in 2014. Lenders are expanding and opening their doors to different types of borrower. An economy on the move needs rapid finance that can get projects started – and short-term secured lending is moving to fill that gap”
Bridging Trends
The most significant factor powering the expansion of gross lending is growth in the number of deals agreed. Industry loan volumes during the two months ending 1st January increased by 10.8 per cent compared to the previous two month period. This brings loan volumes for the whole of 2013 to levels one third (33 per cent) higher than the preceding twelve months.
Meanwhile, the average value of a bridging loan was largely static. The average loan is now worth £459,000, representing a slight drop of 1.4 per cent from the two months ending 1st November.
On an annual basis, loans in 2013 were larger than the previous twelve months, in line with the long term trend. For the last twelve months as a whole, loans averaged £430,000, or 5.2 per cent more than the average loan in 2012.
Kreeger said: “Just a few years ago the average bridging loan was worth half what it is now. Since then, the biggest transformation has been a growing interest from bigger property developers, professional investors and small businesses looking for more significant funds. Multi-million pound deals aren’t uncommon anymore, and as 2014 unfolds, even the most ambitious ideas are becoming ever more possible.”
Loan-to-value ratios
The average LTV across all twelve months of 2013 was 46.4 per cent – down from 48 per cent in 2012.
Kreeger commented: “There is certainly space to lend at higher loan ratios this year, and the industry definitely has capacity to fund bigger loans where needed. Alongside rates that look set to stay low for some time, slightly higher LTVs could mean more projects will have access to the finance they deserve.”
Interest rates
As a whole, 2013 witnessed the lowest interest rates on record for the bridging industry, averaging 1.19 per cent over the year. This compares to 1.37 per cent in 2012 and an average interest rate of 1.55 per cent in 2010, the first year of the West One Bridging Index.
On bi-monthly basis, rates have also fallen to a record low. In the final two months of 2013, bridging loans cost on average 1.11 per cent per month, down from 1.22 per cent in the two months ending 1st November.
Vision Finance specialises in raising bridging finance for property professionals. Bridging rates have come down meaningfully over the last 24 months, and finance is now available from 0.65% per month for the right deal, or under 8% per year.
Please speak to one of our bridging experts on 0207 206 2500 or email the team at bridging@visionfinance.co.uk to discuss the bridging market, or indeed a specific project.
