• Business lending starting to drive growth, as 93% of brokers report more commercial lending
The latest West One Broker Sentiment Survey shows brokers expect an average of 45% more bridging business in the next 12 months.
Duncan Kreeger, Chairman of West One Loans commented, “Bridging looks set to expand steadily into 2013. A mild slowdown in the last quarter, as seen in our West One Bridging Index, indicated a moderation in the rate of growth. But these figures suggest a longer term pattern of consolidation. Brokers think bridging still has a long way to go, and this comes as traditional lending models have stumbled once again in August.”
71% expect their own bridging activity to grow in the next year. The number expecting the same amount of bridging business remained small at 26%. Those predicting bridging activity to shrink hit a record low of only 3%.
Brokers also said they expect product rates to ease down and LTVs to edge upwards.
More than twice as many brokers think product rates will go down as think they will increase. 18% of brokers surveyed expected a rise and 39% a fall in rates. 43% believed there would be no change.
Those who think LTVs will increase in the next year outnumbered those who expect a fall by two-to-one – at 25% and 13% respectively. 62% expected no change.
Duncan Kreeger said, “Brokers appear to agree with the conclusions we drew from the latest West One Bridging Index. Rates have risen from low levels at the beginning of 2012, but this increase is not expected to become a long-term trend. Equally, any indication that LTVs will rise means that the fall we recorded in the last quarter does not represent the start of any major upheaval. What is encouraging is that brokers aren’t forecasting any sort of major correction – either in product rates or credit availability. Such gradual changes are consistent with the increasing stability and maturity of the bridging market. Our early indications for September support this.”
Business lending driving growth:
The rate of growth in business lending (secured against a residential property) accelerated faster than any other part of the market. The number of brokers reporting growth in the sector was just 54% in February. Now 82% of brokers say they are seeing increased activity. Commercial bridging loans (to businesses and secured against commercial property) are a growing area for 93% of brokers.
Duncan Kreeger commented; “The government is keen to stress the importance of increasing business lending, but can’t put its finger on where the money should come from. While the economy has shrunk, the number of small businesses has boomed – according to BIS, 60% of private sector jobs now come from SMEs. More bridgers are lending to people who can demonstrate a real business case but are shunned by restrictive practices at high street banks. In May, Lord Young’s report identified peer-to-peer and asset-backed finance as possible sources of business funding. He hit the nail on the head.”
97% of brokers reported an annual increase in residential bridging, up from 64% in February.
State of the market in Q2 2012:
As a result of these changes, professional and amateur landlords now make up 25% and 13% of the market respectively. Owner occupiers account for 18%.
Business loans currently constitute 19% and those to developers 25%.
Overall growth averaged 46% in the year to August.
In the last year, 73% of brokers who write bridging loans have grown their own business. This figure was 63% in February. Numbers of brokers reporting falls in bridging activity are down to 6%, from the 9% at the start of the year.