The Association of Short Term Lenders (ASTL) said that its members had written £2.59bn worth of bridging loans during 2015.
However, despite it being good news for bridging lenders, Bob Sturges, Head of Communications at Omni Capital, felt bridging was still a niche product best suited for specialist circumstances.
"Whilst gratifying to hear of bridging's continuing success, I think it's important to keep a sense of context,” said Bob.
“Even its most optimistic forecasts size the sector at around just 2% of the mainstream mortgage market.
"Whilst not to be sneered at - indeed, bridging's upward trajectory continues to impress - it confirms what most of us already know: that bridging is a niche product best suited to specialist circumstances.”
In revealing the figures, Benson Hersch, Chief Executive of the ASTL, felt that brokers and borrowers were now turning to bridging loans as opposed to mainstream mortgages.
Scott Marshall, Director at Roma Finance, agreed with Benson and felt it was no surprise that bridging was outstripping the general mortgage market.
“It provides an excellent facility for buying and renovating property quickly while longer-term finance with the high street banks or building societies is arranged,” said Scott.
“We are also seeing a rapid increase in demand as the stamp duty tax deadline looms and buy-to-let landlords rush to add to their portfolios.
“But bridging has many other uses too for business cash flow, growth and diversification.”
Scott added that the many ways bridging can be used also outstripped what a mortgage can be used for.
“Even if the buy-to-let market has to readjust to the upcoming tax changes, there are enough positives for bridging to continue to grow in use and popularity,” said Scott.
“The private rental sector is here to stay for a long time yet and so too is bridging finance."
Duncan Kreeger, Director at West One Loans, also felt he saw no end to the rise of bridging finance.
"[Firstly], as houses become more expensive, more people are looking to buy properties that need renovation and need bridging loans to purchase properties that high street banks won’t lend on," said Duncan
"[Secondly], with the property market getting progressively less affordable, we are becoming a nation of renters – enterprising investors are getting into the letting business, driving demand for similar buy-to-let transactions.
"On top of that, entrepreneurs are increasingly using their homes as collateral to get start-up financing, before paying back once their business is up and running.”
Ashley Ilsen, Head of Lending at Regentsmead, felt less stringent criteria and a wide variety of lenders benefited the bridging market.
“Bridging also has a very different reputation to several years ago where it previously may not have been considered a viable alternative as a way of raising funds,” said Ashley.
“Nowadays, bridging is perceived as being much more mainstream.”
Keith Aldridge, Managing Director at Amicus, agreed that there was more confidence in the bridging market thanks to the work ASTL members had done in improving its reputation.
“There is no doubt that the two ‘c’ words; confidence and credibility, are contributing to the sustained growth of the sector,” said Keith.
“Amicus had a record 4th quarter in 2015 and the first half of this quarter (Q1 2016) gives us every reason to believe that the considerable investment we have made in resource and technology will be rewarded in 2016.
“I believe the traditional mortgage market will plateau during the year but we are diversifying our proposition to meet the growing demand from our commercial and development clients and expect to be lending £50m a month into Q2.”
Bob also felt that the mainstream mortgage market would continue to suffer from being constrained through tough regulation, despite an unprecedented period of rock-bottom interest rates.
"None of this looks set to change dramatically in the foreseeable future,” added Bob.
“And with interest rates likely to rise at some point in the next 18 months, I do not see circumstances favourable to a surge in mortgage lending.
“But nor, from a macro-economic perspective, do I necessarily see it as a cause for regret."
Leave a comment