Government equity loans amounted to £941 million compared to £2.38 billion in property bridging loans, according to the latest West One Bridging index.
The data also shows that there has been a 32% rise in the number of completed bridging loans over the course of 12 months.
‘New homes are the fundamental fuel of a healthy property market so the government and Bank of England are right to highlight the dangerous squeeze in the supply of property. But there are other ways to supply new homes. We need to make far better use of the buildings we already have,’ said Duncan Kreeger, director of West One Loans.
‘Help to Buy has a critical role to play in kick-starting brand new building sites, yet ground-up development is only one part of the finance that property professionals need in order to supply raging demand,’ he pointed out.
‘Thousands of under loved and under occupied properties are still left waiting for refurbishment or conversion. Property developers and potential landlords just need the right sort of finance to get these empty offices or dilapidated blocks of flats to a decent standard and on the market. Flexibility is king and government schemes can only do so much,’ he added.
The data also shows that over the 12 months ending at the beginning of May, the bridging industry provided annual gross lending of £2.06 billion. This represents growth of 17.9% compared to the previous 12 months.
However, recently this growth appears to have moderated. Lending has grown at an average rate of 0.8% per month since 1st March when industry gross lending totalled £2.02 billion. If this latest expansion continues for a full 12 months it would represent an annualised rate of growth of 10%.
‘Meteoric expansion in recent years is only the start of a new era. This reinvigorated industry has built a solid foundation for further growth. Certainly, as with all industries, such transformational progress must gradually steady and bridging is already maturing, consolidating its enormous expansion,’ explained Kreeger.
‘Bridging is not suffering from any of the latest challenges afflicting the mainstream mortgage market. While the high street gets the jitters as incomes struggle to keep up with house prices, the best bridging lenders are in the business of solving this problem. Our loans always aim to add value to property by actually increasing capacity in the right places. It’s a system that grows the pool of winnings, rather than just splitting the wealth of property in a different way,’ he added.
Regarding trends in the bridging industry, bridging loans are growing in terms of both size and number. The average loan size now averages £457,000 over the 12 months to May. This is 10.7% larger than the average loan in the previous 12 months when it was £404,000.
However the most significant growth in overall lending by value has been driven by increased volumes. In the last 12 months the volume of completed bridging loans has expanded by 32.4%. This is despite a slight seasonal dip in volumes over the two months ending in May with 4.1% fewer completed loans than in the previous two months.
‘Brokers want lenders who can help with any size of loan just like they want lenders who can help in any corner of the UK or with any type of property. At West One we pride ourselves on funding an increasing number of multi-million pound deals every week,’ Kreeger said.
‘But as we’re seeing across the whole industry, growth is solid because it’s coming from so many different sources. Gross bridging lending is set to continue to climb for the rest of year and into 2015. Partly that will be thanks to bigger loans and partly thanks to sheer volumes,’ he pointed out.
The index also shows that bridging LTVs are at record low. Loan to value ratios across the bridging industry have reached the lowest point on record, after a prolonged and consistent drop since the end of 2013.
In the last 12 months bridging LTVs have averaged 45.3%, down from 46.9% in the 12 months to May 2013. Most recently, in just the last two months, LTVs have averaged only 41%, sharply down from LTVs of 45.2% in the previous two month period to the beginning of March.
‘As prices pick up, we’re able to lend more cheaply against the very same property and potentially more ambitiously. But LTVs are falling across the board. Bridging is now more stable than ever before while the industry is lending record amounts. This leaves plenty of capacity for even higher gross lending later this year,’ explained Kreeger.
‘Unlike mainstream finance, bridging lenders are not overstretching themselves in any way. Alongside our property partners we have real solutions to Britain’s lack of housing and rising prices are only helping us to tackle this one issue at the heart of fears about the property market,’ he concluded.
