Growth in bridging loan market hit by slowdown

Friday 10th August 2012

The bridging loan market fell 5% in the second quarter of this year, while the average loan size dropped 11%.

The slowdown was blamed on the spate of public holidays and tighter funding, according to West One, which tracks the market.
 
The average loan size fell from £412,000 in Q1 to £368,000 in Q2.

West One said loan sizes have fallen steadily since March when they reached a record high of £479,000. However, it said the fact that the average loan size was 25% higher than in Q2 last year reflects the rapid rate of growth over the longer term.
 
The number of loans granted in Q2 fell by 5% from Q1, but year on year, the volume of loans was up 52%.

Duncan Kreeger, chairman of West One Loans, said: “It’s hardly surprising the pace of growth is slowing. Last year and the first quarter of this year were a golden spell for bridging.

“The rate of growth we saw over that period was never likely to be sustained over the long term. But that’s not to say the bridging market is running out of steam. We believe it’s still some way off reaching its peak. The industry is maturing and entering the next phase of its evolution.

“It’s beginning to attract a more up-market class of buy-to-let investor who, despite being creditworthy, often struggles to meet the increasingly tough lending criteria demanded by high street banks.”
 
He added: “Even wealthier investors are being priced out of high street finance by tough lending criteria and increasingly high deposit requirements. Increased demand from higher net-worth property investors is helping drive the bridging industry forward at a quick pace.”

He said that as of June, there were only four buy-to-let mortgages at 85% LTV available on the high street, and went on: “The decline in high street lending over the last couple of months has been great news for the bridging industry.

“Buy-to-let demand is still high, with six out of every ten landlords planning to expand their portfolios by the end of the year. The problem is that high street banks can’t meet the appetite for buy-to-let property. The flood of demand is spilling over from the high street and into the laps of the bridging market.”
 
Residential lending accounted for 86% of total brdging lending in Q2, compared with  81% in  2011 and 70% in 2009.