That figure is higher still among brokers who specialise in bridging business, who expect the volume of loans they write to increase by 33% in the next year.
According to a poll carried out by West One, only 9% of brokers say they are writing less bridging business than 12 months ago. Some 28% said they are writing a similar number of loans, while 63% of brokers are writing more loans than 12 months ago.
Overall, brokers are writing 28% more bridging loans than a year ago, with one in ten saying the volume they have written has more than doubled in the last year.
‘The bridging industry has grown rapidly since 2010. Net lending is up 56%, which makes the mainstream market look turgid by comparison. The rate of growth shows no signs of slowing and 2012 will be a testing year for mainstream lenders,’ said Duncan Kreeger, chairman of West One Loans.
He believes that the Council of Mortgage Lenders has done its best to map out an encouraging year for the mortgage market, but says that the topography looks treacherous. ‘Gross lending will only be a third of what it was in 2007, and investors are shunning banking stocks as they try to avoid the chaos caused by political dithering in Europe. This is pushing up the cost of funding for the mainstream banks. It means borrowers are finding traditional longer term funding harder to come by, which is making bridging finance a more attractive option,’ he explained.
‘Things look to set to get even worse. With high street lenders retreating even further into their shells, they won’t be able to cater for the demand for mortgage finance, particularly from buy to let investors, who will turn to bridging to finance their projects. It’s no wonder brokers are taking on more bridging business,’ he added.
The research also found that only 14% of brokers say LTVs on bridging loans are likely to fall over the next six months, reflecting the strong demand by borrowers for more highly geared products. Some 36% say LTVs will rise next year, and just under half, 49%, predict they won’t change.
There was also positive news for borrowers and buy to let landlords on rates, with two thirds, some 67%, of brokers predicting the average rate on a bridging loan will either hold steady or fall in the next six months.
‘In stark contrast to the mortgage market on the high street, rates in bridging don’t look likely to increase in the next six months. The major banks will look to pass these costs onto borrowers in the guise of higher rates. This will encourage even more investors to turn to bridging,’ said Kreeger.
‘The fact more investors are turning to bridging, particularly buy to let landlords, is linked to rising LTVs. Banks are looking to protect their balance sheets so are becoming more reluctant to lend to borrowers who only want to put down a small deposit. This is encouraging more investors to turn to bridging, where high LTV loans are more accessible,’ he added.
The research also revealed that buy to let is the fastest growing type of lending written by brokers, reflecting increasing demand from buy to let investors and amateur landlords. Some 33% of all bridging loans written in the last twelve months were for buy to let investors, who received a higher proportion of loans than any other borrower group. The next highest group was developers, who accounted for 22% of all bridging lending.
‘Only 6% of brokers think it’s a bad time to invest in buy to let, while 83% think it’s now a good time for landlords to expand their portfolios. It is a reflection on the high yields available in buy-to-let, which is performing more strongly then traditional asset classes, and is tempting in more investors as result,’ explained Kreeger.
