Bridging loans surpasses Help to Buy in UK mortgage market
The UK government’s flagship Help to Buy scheme has provided less than half the funding for new homes as bridging since the equity loan scheme was launched in April 2013, it is claimed.
Government equity loans amounted to £941 million compared to £2.38 billion in property bridging loans, according to the latest West One Bridging index.
The data also shows that there has been a 32% rise in the number of completed bridging loans over the course of 12 months.
‘New homes are the fundamental fuel of a healthy property market so the government and Bank of England are right to highlight the dangerous squeeze in the supply of property. But there are other ways to supply new homes. We need to make far better use of the buildings we already have,’ said Duncan Kreeger, director of West One Loans.
‘Help to Buy has a critical role to play in kick-starting brand new building sites, yet ground-up development is only one part of the finance that property professionals need in order to supply raging demand,’ he pointed out.
‘Thousands of under loved and under occupied properties are still left waiting for refurbishment or conversion. Property developers and potential landlords just need the right sort of finance to get these empty offices or dilapidated blocks of flats to a decent standard and on the market. Flexibility is king and government schemes can only do so much,’ he added.
The data also shows that over the 12 months ending at the beginning of May, the bridging industry provided annual gross lending of £2.06 billion. This represents growth of 17.9% compared to the previous 12 months.
However, recently this growth appears to have moderated. Lending has grown at an average rate of 0.8% per month since 1st March when industry gross lending totalled £2.02 billion. If this latest expansion continues for a full 12 months it would represent an annualised rate of growth of 10%.
‘Meteoric expansion in recent years is only the start of a new era. This reinvigorated industry has built a solid foundation for further growth. Certainly, as with all industries, such transformational progress must gradually steady and bridging is already maturing, consolidating its enormous expansion,’ explained Kreeger.
‘Bridging is not suffering from any of the latest challenges afflicting the mainstream mortgage market. While the high street gets the jitters as incomes struggle to keep up with house prices, the best bridging lenders are in the business of solving this problem. Our loans always aim to add value to property by actually increasing capacity in the right places. It’s a system that grows the pool of winnings, rather than just splitting the wealth of property in a different way,’ he added.
Regarding trends in the bridging industry, bridging loans are growing in terms of both size and number. The average loan size now averages £457,000 over the 12 months to May. This is 10.7% larger than the average loan in the previous 12 months when it was £404,000.
However the most…