Help to Buy equity loans have so far provided £208 million in gross lending, according to official statistics for the period between May and September this year. Meanwhile, over the same five month period, alternative finance in the form of short-term secured loans provided £878 million in gross lending, according to the latest West One Bridging Index. This equates to more than four times the total lending achieved via the first phase of Help to Buy over the same five month period.
Duncan Kreeger, director at West One Loans comments:
“So far, the first phase of Help to Buy has only helped a few thousand cases of first-time buyers struggling to get onto the property ladder. The real elephant in the room is the sheer lack of homes available on the market.
“It’s becoming increasingly obvious that heating up the pressure cooker of consumer demand will do little to ease the worsening bottleneck of supply.
“But while those in the property industry are desperate to tackle the supply shortage, the real barrier is a lack of finance to create more homes. Conversions, renovations and new developments are all vital in the struggle to keep up with demand. But while mainstream finance is slipping behind, alternative finance is making it easier to find the backing for schemes that can make a solid difference on the ground. Short-term secured loans are often the best way for property professionals to bring these projects to life.”
In the twelve months to 1st November, industry gross bridging lending totalled £1.93 billion, up 5.5% since standing at £1.83 billion only two months ago.
On an annual basis, this brings growth to 29% compared to the previous twelve months to November 2012, when gross bridging lending was £1.49 billion.
In the two month period from 1st September to 1st November, industry gross bridging lending was £397 million, up 6.3% from £374 million in the previous two months. On an annualised basis this is equivalent to gross lending of £2.34 billion.
Duncan Kreeger continues:
“This industry provides vital support for some of the most central pillars of economic recovery. By doing things differently we can expand the supply of homes to let and to buy. We can provide the liquidity for large firms to get million-pound deals done. And critically, we can support SMEs too – forgotten and left out in the cold by so many high street lenders.
“Most importantly, bridging finance is about collaboration. Short-term secured finance can get things moving. Often, mainstream finance will step in once the ball’s rolling – but more often than not, bridging lenders are the ones taking the difficult free kick.”
Since September, gross lending has expanded for the most part due to a greater number of loans. Over the last two months, loan volumes have increased by 6.1% compared to the previous two month period. Meanwhile the average loan is worth 3.4% more than in the previous two months to 1st September.
However, on an annual basis, the expansion of the bridging industry is due more equally to larger loans and to greater volumes.
In the twelve months to 1st November loan volumes were 16.9% ahead of the previous twelve months. Meanwhile, the size of the average loan grew by 17.1% over the same period, averaging £465,000 compared to £449,600 in the preceding twelve months.
Duncan Kreeger comments:
“With more ambition for bigger projects, and steadily expanding volumes, this feels like a healthy expansion. The bridging industry is still growing much more quickly than mainstream mortgage lending – and going in a completely different direction to retreating mainstream business finance. Growth has settled into a sustainable pattern.
“Bridging isn’t here for a sprint. The industry’s in good condition for a marathon. And with the UK economy still in its current state, it’s a marathon we’re all facing.”
Loan-to-value ratios have fallen over the last two months. Compared to the previous two month period, when the average LTV was 44.3%, loan ratios are down by 1.5 percentage points.
This leaves the average LTV in the bridging industry at 42.8%, or 3.2% lower than at the same point a year ago.
Duncan Kreeger concludes:
“Properties are worth more than last year – or even a few months ago. And the effects are very real when it comes to loans. More valuable security can underwrite a larger loan. And higher values have helped bridging lenders make larger deals.
“But lower LTVs mean there’s actually even more spare capacity to lend – without making loans any less appealing to potential investors. Credit-worthy borrowers are even more worthy of support than a few months ago, which is great news for everyone.”
