MMR speeds up bridging growth

MMR speeds up bridging growth




It has just been revealed that growth in bridging lending has rapidly accelerated since MMR, according to the latest West One Index….

 It has just been revealed that growth in bridging lending has rapidly accelerated since MMR, according to the latest West One Index…


The latest West One Bridging Index has reported that bridging lending has risen to 24 per cent per year, up from 18 per cent before new MMR rules were implemented.

Results showed that since the MMR rules, bridging loans have rapidly supplied £470 million in gross lending, within the space of the last two months, ending 1st July.

It has been revealed that now, gross bridging lending stands at a record-breaking £2.17 billion per year, for the twelve months ending July. It was stated that if the latest rate of growth continues, the UK short-term secured lending industry could be worth £2.8 billion per annum by the end of this year.

Commenting on the results, Duncan Kreeger, Director of West One Loans, said: “Bridging is firing on all cylinders. And this is down to a number of positive factors all coming into alignment over the past few months.

“Thanks to the constructive approach of the financial regulators, the new MMR affordability assessments don’t apply to most bridging loans.  Due to the nature of short-term secured finance, the loan term is almost always less than a year and interest is often rolled up.

“By contrast, post-MMR delays in the mainstream market have crept into many areas of buy-to-let and commercial lending.  So many property investors are now more actively choosing to bypass the usual lenders from the start – as the high street is forced to focus its attention on simpler cases.

“This is combining with a growing awareness about what bridging finance can get done – thanks in no small part to the growing expertise of specialist brokers.  As the variety of borrowers grows in line with the sheer numbers of inquiries, we don’t expect this acceleration to reverse any time soon.”
 
According to the index, bridging interest rates have averaged 1.17 per cent over the year to 1st July 2014, which is apparently down by ten basis points from the previous 12 month period.

Most recently, on a bi-monthly basis rates have fallen to just 1.14 per cent over the two months ending 1st July.

The bridging market has also grown by the progress in both the size and number of loans being written. 
The index stated that the average loan size now averages £475,500 over the twelve months to 1st July, which is a 14.8 per cent improvement on the previous twelve months, when the average loan was for £414,000.

Duncan added: “It’s encouraging for the industry’s future growth prospects that even as volumes and loan sizes are both growing rapidly, loan-to-value ratios remain restrained.

“Lenders, with help from expert brokers, are lending only to credit-worthy borrowers. And even after the current acceleration, amongst all the industry players there is a sense that lenders have even more capacity.

“But maintaining a note of caution is sensible, and bridging lenders and borrowers alike will be able to keep making extraordinary progress without resorting to higher LTVs.”

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