• Bridging loans could beat £2 billion estimate

    There is some interesting news about bridging loans in the press at the moment.  In particular the West One Bridging Index is predicting that £2 Billion will have been lent in short term loans before the end of 2013.

    Duncan Kreeger, director at West One Loans commented:

    “Our £2 billion prediction for this year was labeled out of date when mortgage lending recovered slightly.  Now it looks like an underestimate.  That’s because of the different culture in the bridging industry – we’re not afraid of the projects that deserve real investment.

    The UK bridging industry is expect to provide borrowers with a targeted £2 billion in short-term secured finance by the end of 2013, according to the latest West One Bridging Index. In the second quarter, industry gross bridging lending was £492 million, or an annualised rate of £1.97 billion. In the twelve months to June, gross bridging lending was £1.76 billion. Annual lending has grown by 9 per cent since the first quarter, and […]

    So perhaps it’s appropriate to re-cap the Pros and cons of bridging loans

    The Ftadviser notes that while bridging loans may charge an interest rate of as low as 0.75 per cent per month, Rob Jupp, incoming chairman of the Association of Bridging Professionals, warns penalty interest if the loan is not repaid on time is typically 3 per cent.

    Alan Margolis, head of bridging at United Trust Bank, says

    most short-term loans are in essence similar, but where they will usually vary is with regard to interest rates, fees and charges.

    Prospective borrowers must make a realistic assessment of the cost and terms of any bridging facility and of the ability to settle it or refinance it within the agreed timescale… borrowers must still apply the same level of focus on the proposed terms as they would with other types of funding.

    Click here to view original web page at www.ftadviser.com

    A Quick search on the internet for bridging loan providers will produce a very long and enthusiastic list of lenders and brokers.  It is tempting to think that going direct to the lender is a cheaper option.  Although this is not always the case, if you need specialist lending a broker may be best placed to find the right deal for you.

  • Bridging Finance News Update

    West One Loans Bridging Finance Index

    Research from West One Loans, who claim to be the largest privately funded bridging lender in the UK, shows that demand for bridging finance surged to £911m.  Here are the mains points from their press release:

    • Gross bridging lending in 2011 was 110% higher than in 2010
    • The average loan size was 28% higher than last year
    • The growth is being driven by Buy-to-Let lending
    • The market has shifted away from commercial lending to residential.

    Duncan Kreeger, Chairman of West One Loans, said:

    “Buy-to-let is the horse pulling the cart, and it’s driving the bridging industry forward at a rate of knots. The first time buyer mortgage famine means a feast for property investors. Rents are high, property prices are deflated, and that has created a vibrant rental market that investors are piling into.”

    “Despite banks increasing the number of buy-to-let mortgages, they have been unable to keep pace with the proliferation in demand. Buy-to-let lending is still very low by historic standards. In 2011 there were only 124,000 buy-to-let loans, compared to 346,000 in 2007. As a result more landlords are using bridging loans to finance the development of properties they can’t get mortgages on. Demand for bridging loans is sky high, and will continue to push towards the stratosphere in 2012.”

     

     Up To 90% L-T-V For Bridging Finance

    Sounds incredible, but Federal Bridging Bank are introducing a bridging loan product offering up to 90% loan to value.  The product will be available nationwide and is being pitched as filling a gap in funding for property deals outside of the M25 and Manchester areas.

    There are reports that £40m has been put aside for lending and that a team has been put together to manage the loan book.

    The Bridging and Commercial website carried the story in late Feb as an exclusive but the news has now appeared on various other sites.

    OFT to revoke the license of Bridging Loans Ltd

    The Office of Fair Trading has decided to revoke the license of Glasgow based lender Bridging Loans Ltd. along with four associated companies.

    Bridging Loans Ltd can continue trading until an appeal has been determined, however they have pointed out to the press that although regulated lending is not a major part of their business they are appealing.

    In November 2010 the FSA fined the firm £42,000 for failures relating to lending practices.

    And now for a quick round up of other Bridging Finance news

    Bridging Rates Going Down?

    Is a price war looming in the Bridging Finance Market? Various lenders are reporting cuts in rates, but are these just headline grabbing PR stunts?Lets start with three announcements of "cuts’ in bridging rates.

    Storified by Chris Clarke · Thu, Mar 29 2012 03:15:04

    UTB announces new bridging rates – Bridging & Commercial – Mortgage Introducer UKUnited Trust Bank has launched new bridging rates starting from 0.95% per month.
    myintroducer.com | News | Commercial Acceptances introduces lowest ever bridging rate productCommercial Acceptances, the wholly-owned subsidiary of Close Brothers, is set to introduce its lowest ever bridging rate product for customers. At just 0.99% per 30 days the new rate will be one of the most competitive in the bridging market and comes with no hidden fees.Available on loans up to £3.5 million, the product has a £200 administration fee regardless of loan size but is free of any arrangement, redemption or early repayment charges.
    Bridgebank reduces rates on new product – Bridging & Commercial – Mortgage Introducer UK lnkd.in/wiBduT

  • Bridging Finance – quick round up of rates and deals

    It’s probably true to say that the majority of people using bridging finance are doing so for the first time, and probably won’t use it again.

    That’s not to say there is anything wrong with the bridging finance industry, but it’s relevant because it means that customers and brokers are unlikely to be familiar with the types of deals available.

    If nothing else, it is useful to understand that bridging finance lenders are unregulated, this does not mean that they are all sharks, in fact there are plenty of very professional operators in the sector.  But it is absolutely vital to understand that any private individual with a consumer credit license can lend money, and some of them are not very nice.

    Look out for lenders and brokers that are members of an umbrella organisation, such as the National Association of Commercial Finance Brokers.   Also be prepared to use a commercial finance broker.  Mainstream financial advisers do not generally have access to all the specialist lenders and will most likely resort to referring your case to a panel.

    Before starting your search be absolutely clear about what you want.  Don’t just tell your broker or lender that you want to borrow £75,000 over 4 months.  Tell them what the project is all about, why you are doing it and why you know you can repay the money.  The clearer your instruction the better deal you are likely to get.

    Bridging Finance Deals

    • Lancashire Mortgage corporation’s auction bridge –  This is an auction purchase product which is ideal properties under £150,000.  There are special arrangements for valuations
    • Bridgebank Capital’s Renov8 product – Ideal for property development or refurbishment.  Better deals for people with a proven track record in property development.
    •  Lowry Capital’s express refurbishment product – may lend on a property shell and won’t look at the current state of the property.  Again, ideal for property developers.
    • Regentsmead – well established lender, and one that does not take a one-size fits all approach.
    • Cheval – Been around for a long time and offers a wide range of products.  Can be a bit picky but a very good place to start.

    This may sound odd.  But don’t focus on interest rates.  It is far cheaper in the long run to get the right deal first time.  Badly fitting bridging finance can be really expensive if things go wrong.

  • Business Finance News – Good and Bad

    A quick round up of business finance news.

    A recent survey of 1,000 SME’s by HSBC Commercial bank has established that more than eight out of ten small business owners think that their businesses will grow over the next 12 months.

    Whilst raising business finance remains challenging around 14% of businesses that responded to the survey stated that they are starting to trade internationally to generate growth.  Just over half expect to increase their turnover.

    Just keeping up with the competition remained the primary goal of around 1 in 5.  Just 17 per cent are looking to grow their business by investing in new equipment, which is possibly not good news for lease finance lenders and brokers.

    Jacques-Emmanuel Blanchet, head of commercial banking UK at HSBC says

    ‘It is encouraging to see UK SMEs looking ahead to next year with optimism and a desire to grow their businesses, even to achieve market-leader status.’

     

    Meanwhile unemployment continues to rise and has hit a 17-year high of 8.4 per cent of the workforce.  Indications are that the number of jobseekers looking for employment will continue to rise; Charles Levy, senior economist at The Work Foundation says,

    ‘Workers are facing the toughest labour market since the start of the recession …
    ‘This picture will only improve if we return to strong quarter on quarter employment growth.’

    Somewhat contrary news comes from GfK NOP Consumer Confidence Index which states that consumer confidence in the UK rose in January.  Whilst this may see at odds with the general feeling in the market Nick Moon, managing director of GfK NOP Social Research says,

    ‘The Index is sometimes subject to non-economic influences, and the uplift may simply reflect a hangover from the Christmas feel-good factor.
    ‘If this is true, we should be on the lookout over the next few months for a possible bounce from the Olympics as well.’
    ‘Consumer confidence is still seriously depressed and we should treat this month’s modest improvement with caution. Should February show another rise then we may be seeing signs that the gloom is dispelling — until then we should treat January’s findings as good, but certainly not great, news,’

    What do you think about the immediate prospects for business finances in the next twelve months?

  • Bridging Loans Explained

    Bridging loans can be used for almost any purpose so long as there is enough equity in the property.  The UK Bridging Loan market is estimated to be worth £2.5 billion and the demand for bridging loans is believed to be growing by 25% year on year.  Bridging finance can be made available for many purposes, the obvious one being to bridge the gap between the purchase of a new property and the sale of an existing property.

    Once regarded as the funding solution of last resort, bridging finance has under gone something of a transformation over the last few years. It is no longer the preserve of the desperate house-mover but a valuable tool for savvy property investors and developers looking to secure a bargain.

    The growth in the number of bridging lenders means that there is more competition, which in turn has led to more competitive rates and more innovation, particularly around the issue of exit fees and default rates. Many of the more well established lenders have been forced to change their business practices to keep up with this evolving market. Thankfully the practice of hiding crippling terms in small print will no longer be tolerated in a market dominated by brokers. .

    We all know how frustrating it can be when a long chain suddenly breaks and these at the top look like losing their dream home. but there are plenty of other instances when bridging finance might be appropriate. For example an auction purchase which only has 28 days to complete, or a business which finds itself needing to find a substantial amount of tax money quickly.

    Bridging Loans are often used for:

    Auctions:
    When purchasing property at auction the borrower usually has a deadline of 28 days to complete the process.  Although it is not uncommon for borrows to be told that it is possible to complete purchase using conventional finance in practice the funding is rarely available in time.  Having paid a 10% deposit it is vital that completion takes place within the deadline.  This is where bridging loans are most useful, once the valuation has been received legal completion can often take place within a few days.

    Buying Property at Undervalue:
    Approaching a mainstream lender with a proposal to purchase a property at under value is pointless as they will only consider the purchase price.  However bridging loans can be raised against the value of the property and not the purchase price.  This means that theoretically it is possible to purchase a property at discount without putting any money into the deal.

    Debt Relief:
    Business people often get into financial difficulties due to cash-flow problems.  These can be a result of trading problems or even unexpected tax demands, where there is enough equity in a freehold property bridging loans are an ideal solution.

    One aspect of bridging loans which have caused the most concern is the perceived lack of transparency, many borrowers had complained that the rate
    originally offered had been subsequently withdrawn and replaced with a much higher rate. The lender’s would counter this claim by blaming the customer or broker for not supplying accurate information at the outset.  Therefore It is important to make sure that the terms of a bridging loan are explained in clear english, worth remembering that just chasing the headline rate could leave a borrower in future trouble.

    We would love to hear you views on bridging loans, good and bad!

  • The Public Face of Bridging Finance

    The [tag]Bridging Finance[/tag] market is reported to be currently worth about £2 billion per year, which would make it a significant part of the UK property finance market. Despite its size the [tag]Bridging[/tag] market is surprisingly under represented in the mainstream media.

    Bridging Finance is set to continue to be a major component in the overall mortgage market, and in fact some analysts predict that it could be worth over £5 billion by 2010. One of the reasons why Bridging will remain a viable option is because it would appear to be immune to the state of the overall property market. This is because in a rising market there are plenty of property entrepreneurs willing to pay a premium to move property quickly, however in a declining market there are more distressed sales creating the need to “bridge” a shortfall.

    One fascinating aspect of bridging is the role of the mainstream banks, typically they have wanted to keep at arms length from bridging finance. This is because by its very nature a bridging lender has to be willing to step in quickly to repossess a property at the first sign of trouble, something that a bank’s PR department are keen to avoid.

    However, on the occasions that a high-street bank does get involved in [tag]bridging loans[/tag] it is normally in a very tightly controlled environment. What is interesting is that when a property dealer approaches an independent property finance lender they don’t necessarily realise that around 65% of the loan amount is usually sourced from a high-street lender from the wholesale markets. Not that any of this matters, but it is nice little irony.

    The public image of Bridging Finance is changing as more independent lenders get involved, we would like to hear from property developers and entrepreneurs about their experiences of using bridging finance, good and bad.

    Leave a comment below and let us know what you think.