Since June last year the annual rate of growth in gross bridging lending has averaged 25.1%, representing a significant stabilisation.
By contrast, growth in the previous period was faster, but more volatile.
Between March 2012, when annual growth figures were first available from the West One Bridging Index, and June 2013, annual growth in bridging lending averaged 56.3%. However in this era every individual recorded period saw growth that varied from the average rate by at least 10 percentage points.
The latest annual growth is well within the bounds of the new regime, standing at 22% in the twelve months to 1st September compared to the previous twelve-month period.
Gross annual bridging lending in the UK now stands at a new record of £2.23 billion, as of 1st September 2014.
In the preceding twelve-month period, ending 1st September 2013, annual gross lending stood at £1.83 billion.
On a bi-monthly basis, the two-month period ending 1st September saw £452 million in gross lending, up 21% from £374 million in the same two months in 2013.
Duncan Kreeger, director of West One Loans, says:
“In a world returning to economic hope, there will be even sharper demand for imaginative finance as we saw in a world paralysed by financial fear.
“So bridging lending continues to grow, and reaches a fresh record practically every month. But bridging is also securing a new, more reliable mode of expansion to fit a new, more professional and competitive industry.
“The latest record has been achieved in line with that new mood. As detailed in the previous West One Bridging Index, industry growth picked up again over the summer, after a slightly slower period in the spring. And since then bridging lenders have continued that pattern of solid progress. Looking ahead to the end of the year and into 2015 this reliable expansion looks set to continue.”
Rising numbers of loans are powering growth in total bridging lending alongside larger loan sizes.
However growth in the number of loans is the most significant of these factors. Industry loan volumes over the last twelve months have grown by 23.2% compared to the previous year ending 1st September 2013.
Meanwhile the size of individual loans has grown slightly more gradually. Average loan sizes now stand at £497,000 over the twelve months to 1st September, up 15.9% from £429,000 in the previous twelve months.
Duncan Kreeger adds:
“Success should be measured both in terms of the total size of the industry and the number of projects that bridging lenders support. Both are growing.
“A modern bridging industry, with a steadier pace of growth is not about standing still. Lenders are still considering every feasible borrower and the best will make decisions rapidly. Steady growth in absolute terms is simply a smaller percentage growth of total lending at any point. A larger industry will also see less natural volatility in lending levels.”
Average loan to value ratios have increased to a twelve-month average of 47.3%, up considerably from the low of 46.5% witnessed over the previous twelve months, ending 1st July 2013.
Duncan Kreeger comments:
“Bridging loans are still covered twice over by the value of their security, and that doesn’t look set to change dramatically any time soon.
“With renewed prosperity and optimism, lenders must also temper the mood of expansion with caution. But today’s most successful bridging lenders cut their teeth in the recession and know how to manage risk.
“All the evidence suggests that bridging lenders are making a conscious decision to back up their support for dynamic projects with solid security.”
Bridging interest rates have averaged 1.17% over the year to 1st September 2014, down by seven basis points from the previous 12-month period, when this stood at 1.25%.
However, most recently, on a bi-monthly basis rates have in fact risen from just 1.14% over the previous two months to 1.16% over the last two months ending 1st September.
Despite these recent falls in market rates, bridging loans also remain an attractive proposition to investors, with a current monthly spread of 0.94% above 10-year Government bonds, which have offered a yield of just 0.21% per month over the same two-month period.
Duncan Kreeger concludes:
“When the right funding lines are available and borrowers can secure the investment they need more cheaply, this makes more real life projects possible.
“Fundamentally that’s what bridging is about. So while the cheapest loans aren’t always appropriate, and lenders must judge deals on a case-by-case basis, lower average interest rates are great news for borrowers – and are allowing short-term secured finance to support the property industry more widely.”
