More property investors are using bridging loans. The growth is down to two factors – speed and a chronic problem with the supply of traditional forms of finance.
Speed is a pull factor, attracting people to bridging finance. It is currently taking too much time for borrowers to get access to finance from high street lenders. The best bridgers, on the other hand, complete deals quickly. It’s so important to us that we employ an internal valuation-auditor to validate and assess valuations.
That gives our investors more confidence in our valuations – and helps them decide whether they want to fund loans faster. That speed makes bridging finance very attractive to investors in a hurry to do business.
The second factor pushes investors towards bridging lenders, away from banks and building societies. The Bank of England’s latest survey of credit conditions revealed high street banks are being forced to scale back lending because of tight trading on the international money markets.
Even if investors were happy to wait for plodding banks to write their loans, they couldn’t get them.
The situation in the buy-to-let market is particularly bad. As of June this year, there were only four buy-to-let mortgages at 85 per cent LTV available on the high street. In the three months to June, lenders advanced just 900 more loans than they managed in the first quarter. It’s a tiny increase to cater for growing demand – research from Mortgages for Business suggests six out of every 10 landlords planning to expand their portfolios by the end of the year.
So, since the credit-crunch struck buy-to-let landlords have been looking to bridgers for funding. This quarter lending isup 111 per cent on the same time last year and conditions are right for bridging to continue growing – by the end of 2012 the industry is set to lend £1.5bn.