Bridging lending makes positive start to 2016 in UK

Taylor Scott International News

Gross annual bridging lending in the UK increased to £3.6 billion in February, up from £3.5 billion at the end of 2015 according to the latest sector index to be published. However, this expansion represents a modest 3% lift in gross annual lending since December, showing that growth has stabilised somewhat from the previous year, according to the West One Bridging index. The index report suggests that growth in short term finance has been driven by a number of factors including an uplift in demand for bridge to let loans in advance of April’s Stamp Duty surcharge. It points out that with property transactions rising 16.1% year on year in February, there has been a surge in demand for bridging finance in order to unblock property chains and raise additional finance. The sale of residential properties at auction also hit a record high in February, rising more than 25% compared to the same month last year. Bridging loans are usually the best option for buyers requiring additional finance for auction purchases because traditional forms of borrowing typically won’t be approved by lenders in time to complete on the sale. This continued growth in auction sales has provided a significant boost to bridging lending in the first two months of the year, the report explains. However, total bridging lending growth was tempered by a month on month flattening of construction output in February which was down by 0.3% alongside a slight 2% contraction of the commercial property market. With smaller developers using short term finance to aid in the completion of projects and specialist finance providers helping fill the post-recession gap in commercial lending, the dip in these markets has had some influence on growth in the short term finance sector. However these markets should improve following the reduction in Stamp Duty announced in March’s budget. ‘A 3% rise in lending may seem moderate, but that’s relative to some significant recent sector expansion. Moreover, we’ve seen healthy growth continuing in the weeks since February. A major contributor is professionals using bridging as part of their strategy to buy residential properties in need of renovation, improve them and re-sell at a healthy profit,’ said Stephen Wasserman, managing director of West One Loans. ‘In this case, the flexibility of bridging finance is well suited to financing such activity. With this group often buying at auction, our experience fits with the surge in auction buying noted. Moreover, we anticipate further growth from this group, favoured by the underlying lack of supply of new homes’ he pointed out. ‘Recently released DCLG figures showed that housing stock growth of 0.73% lagged population growth. That means renovating undesirable properties will continue to be a profitable and attractive business, from which bridging will benefit. DCLG data also showed a greater rise in private rented housing over owner occupied. We’ve also observed strong growth in bridging to acquire properties,… Taylor Scott International

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