By Alan Margolis, Head of Bridging, United Trust Bank
It’s fair to say that 2013 was a good year for the short term bridging loan sector, with a positive mood in the air supported by lending figures published by both the ASTL and NACFB. Not only does this illustrate a clear growth in business but it is evidenced furthermore by at least three trade shows towards the end of the year at which short term lenders were represented.
Simply put, the sector seems to be riding the wave of increasing confidence that is now pushing through much of the British economy. There is, however, a difference between the current mood of optimism and what we saw pre-credit crunch. Seasoned observers will, for instance, have noticed the more modest stands at the exhibitions and talking with those lenders who were around before the credit crunch indicated a greater degree of wariness of higher LTV lending with the general consensus that the quality of applicant seeking short term finance is the best it has ever been. Many lenders, United Trust Bank included, are assisting customers who might once first have sought assistance from High Street lenders.
So as we start the New Year, as with all businesses, we are looking forward, and the real question is what does 2014 hold for those of us involved in, and committed to the short term sector?
Despite the impending cessation of the government’s Funding for Lending scheme, a rise in the base rate this side of the General Election set for May 2015 seems unlikely. Consequently, although fixed rates may rise in anticipation of future base rate increases, rates will still remain very low by historical standards and so it seems that housing activity will continue, certainly in London and the South East. This increase in property activity is positive for short term lenders as we assist those with deadlines to complete on purchases or those who wish to complete a purchase of a new home before selling their existing properties. Likewise, property investors may use our type of funding to secure acquisitions before long term funding is in place.
Strong demand for short term loans is obviously good for lenders. Equally important, however, is the greater appetite for traditional mortgage lending amongst the High Street and Challenger Banks which provides short term lenders with the comfort that their borrowers will be able to obtain refinance where that is the exit from the bridging loan.
And the good news is not confined to the lenders. For introducers, short term loans are a profitable source of business and the ability to earn further where they arrange the exit mortgage. Borrowers are almost certainly seeing the lowest ever interest rates charged, with rates well below 1% available – certainly for those with lower LTVs, and with an increasing pool of lenders to choose from, specific lender-traits are emerging. For example, some lenders will push out at higher LTVs (at a cost) with others, as noted above, sporting historically exceptional rates for low LTVs. There are some lenders who will write loans well below £100,000 whilst others are comfortable with multi-million Pound loans, lenders with the ability to structure and fund large complex loans and ultimately, of course, some lenders such as UTB with a combination of attributes.
Looking beyond 2014, although there are distinct clouds on the horizon such as the inevitable rise in interest rates and its knock-on effects and the uncertainty that comes with a General Election, 2014 is set fair to be another good year for all participants in the short term bridging loan sector whether borrower, broker or lender.