January 2018
By Marie Grundy, Sales Director, West One Loans
As a long-time member of the Association of Bridging Professionals, West One is delighted to continue to support the new Financial Intermediary & Broker Association. From our position of leadership in bridging finance and other areas of specialist lending, we will continue to fly the flag for specialist property financing amongst mortgage brokers.
The UK’s bridging sector continued its healthy growth in 2017 with another strong performance in Q3, yielding a new high of £4.7bn according to findings from our most recent Bridging Index. It revealed that gross annualised lending increased from £4.3bn in June to exceed 2016’s pre-EU referendum high of £4.4bn, and 10% above the same period in 2016.
We anticipate that 2017 will approach a total of £5bn in lending.
The findings provided further evidence that the bridging sector has recovered from the pronounced slump in Q3 of 2016 that followed in the wake of the referendum result. Within this recovery, there do appear to be some changes to market dynamics, however, with a higher volume of smaller-sized transactions characterising recent months.
Nevertheless, 2017 has proven to be a strong year for bridging finance. This is against a backdrop of wider property and property finance markets that have flattened as a result of continued political uncertainty, due to slow progress negotiating Brexit and the prospect of interest base rate rises finally arriving. This new market high therefore reflects the underlying strength of bridging.
At West One, we’ve seen robust growth in our bridging this year, reaching a loan book size of around £450m and experiencing monthly lending records exceeding £60m. A major driver for that continued growth is demand from property professionals for smaller projects that are better suited to bridging funding than to full-blown development finance. However, there have been very healthy numbers of these smaller transactions, meaning total lending has held up well through the end of 2017.
We believe there is still slack in that area and expect that bridging will continue in this pattern of solid growth, despite some slowing in the housing market. With pockets of growth outside London and the South East, we anticipate seeing that growth spread regionally. As performance figures from different sources point to more upbeat property markets in some regional hotspots such as the East Midlands or Greater Manchester, it looks like property investors are focusing on deals in those regions, with typically smaller ticket sizes.
So, what does this mean for 2018? Well, given some of the fundamentals that have supported growth in bridging last year, we are optimistic that short-term lending as a sector will continue to expand. Moreover, the flexibility of the product means it is well-placed to help property developers, landlords and investors adapt to a continually-changing environment, and to finance niche opportunities as they emerge.
It is therefore critical that mortgage brokers and FIBA members are aware of bridging options and how they can work with other products, like development finance, to get their clients’ property projects funded; there are plenty of business opportunities for knowledgeable brokers to capitalise on.