Mortgage market reduces by 4%
The mortgage market reduced by 4% in the year to April, according to a new report.
Findings from the latest West One Bridging Index also indicate that annual bridging lending rose by 35% during the same period.
Rise
Data from the index shows short-term lenders provided in excess of £2.7bn of finance annually, rising from just over £2bn during the twelve months to April 2014. This can be attributed to a solid start to 2015 by bridging lenders, with more than £1bn lent in the first quarter of the year.[1]
Duncan Kreeger, director of West One Loans, noted that, ‘While the mortgage market never looked like recreating its strong start to 2014 in 2015 – due in no small part to the uncertain economic climate created by the election – such worries didn’t plague the bridging sector to the same extent – enabling it to continue on its upward trajectory.[1]
In fact, just as all the election hype was reaching fever pitch in March and April, bridging lenders were beavering away recording one of their busiest and most profitable periods ever, with more than half a billion of short-term finance lent.’[1]
Mr Kreeger believes that, ‘the market has continued in a similar vein since then, with records being broken left, right and centre.’ He feels that the latest annual gross lending figure confirms, ‘the £3bn milestone is now firmly in the crosshairs.’ Continuing, he said, ‘There is a real buoyancy and can-do attitude about the sector at the minute, with lenders and brokers keen to get deals done and competitive rates helping add to the attractiveness of short-term finance. As we head into summer and the weather warms up, there is certainly no sign of the bridging market losing heat.’[1]
Loans
The total number of bridging loans transacted on a monthly basis fell in the first months of the year. However, a strong performance in March and April saw volumes actually increase by 13% year on year. Loan sizes have also increased year on year, standing at £555,483 in comparison to £447,196 recorded previously, which represented a rise of 24%.
Mr Kreeger commented, ‘The usual seasonal slowdown in volumes was actually postponed into the New Year rather than occurring before Christmas, but the increase in transactions since then has more than made up for this.
Mortgage market reduces by 4%
But what is really buoying the market and supporting annual growth is the appetite from bridging borrowers for increasingly large loans. Typical transactions are now above half a million pounds and it speaks volumes that eyebrows are barely raised by big-ticket deals now as they are so commonplace. Developers and businesses seeking large loans now have confidence that short-term lenders can tailor to their needs.’[1]
Bridging the gap
Data from the Index also indicates that LTV ratios are up by 2.2% for the year to April, rising from 47% to 49.2%. Kreeger noted, ‘despite growing demand for larger bridging loans, this hasn’t led to a simultaneous increase in loan-to-value ratios, meaning that borrowers still have significant amounts of their own capital invested in projects are aren’t overburdening themselves with loans they are unable to afford the repayments on.’[1]
Interest rates were found to have reduced during the same period, with charges down to 1.15%, from 1.18%. Rates actually fell to 1.05%, which represented the keenest average in over two years. Despite the low nature of the rates designed to lure borrowers, bridging remains a good opportunity for investors.
Kreeger concludes, ‘As with the mainstream mortgage market, just when you think interest rates have bottomed out, they edge that little bit further downwards. We’re unlikely to see them decrease too much further now though, with lenders instead focusing on innovation and flexibility rather than erode margins any further.
One thing that is for sure is that the foundations underpinning the bridging sector’s growth are deep and strong and we are poised for further growth throughout 2015. As the market continues to expand there are bound to be more sources trying to accurately capture the sector’s performance, but the West One Bridging Index remains the original and authoritative voice on all short-term finance matters.’[1]
[1] http://www.propertyreporter.co.uk/finance/mortgage-market-shrinks-by-4-in-the-year-to-april.html
