According to the report, average monthly interest rates stand at 1.19% over the twelve months to 1st March 2014 while previously over the twelve months ending 1st March 2013, bridging interest rates were 1.34% per month.
On a bi-monthly basis, bridging interest rates averaged 1.19% between 1st January and 1st March. This is very slightly higher than was seen in the final two months of 2013, when the average interest rate had reached a record low of 1.11%.
Potential returns for investors funding bridging loans remain several times the total return of mainstream investment classes. Monthly product rates currently stand at 4.9 times those of 10 year government bonds, with a monthly spread of 0.90 percentage points.
Mark Abrahams, CEO of West One Loans, comments:
“Bridging is becoming ever more competitive – in stark contrast to more traditional forms of finance.
“For example, standard variable rates in the mainstream mortgage market have been rising since April 2012, according to the Bank of England. But our analysis shows that bridging rates have fallen steadily over the last two years.
“Despite this competition, investors in bridging loans can still earn up to five times the monthly interest available elsewhere. And lower LTVs mean investors’ money is secured more safely than ever.”
Loan to value ratios in the bridging industry have fallen on both an annual basis and more recently on a bi-monthly basis. In the two months to 1st March the average LTV was 45.2%, 2.9 percentage points lower than in the preceding two months when LTVs stood at 48.2%.
On an annual basis, loan to value ratios have fallen by 0.8 percentage points, to 46.3% in the year to February 2014, compared to 47.1% in the year to February 2013.
Duncan Kreeger concludes: “As the economy heats up and the property market goes from strength to strength, demand for bridging loans keeps growing. Meanwhile, these same factors mean the security underpinning loans is becoming more valuable – forming a virtuous circle.
“Bridging has even further to go, and it’s clear the value of properties used as security will be less of a restraint as we move through 2014. Lower loan to value ratios mean the growth of the bridging industry is underpinned more solidly than ever before.”
