Given that I wrote the first Bridgingwatch at the start of the year, back on 7 January, I was delighted to be asked to write the last Bridgingwatch of the year, which will give me the opportunity to provide a round-up of the year’s highlights.
As we prepare for Christmas, it seems fitting to follow the 12 Days of Christmas theme, so here goes for my festive 12 Days of Bridging.
On the first day of Christmas my true love sent to me… rate reductions
If nothing else, 2013 will be seen as the year that bridging rates dropped. Within the first two weeks of January 2013, we saw rate reductions from Omni Capital which reduced its headline rate to 0.75 per cent per month. Next to follow suit was Shawbrook Bank which reduced its headline rate to 0.65 per cent per month.
And rates just kept on falling, with United Trust Bank and Precise Mortgage both reducing rates to just 0.69 per cent per month and 0.65 per cent per month respectively.
On the second day of Christmas my true love sent to me… enhanced commissions
Without disclosing the financials, 2013 also saw a large number of the major bridging lenders increasing the share of the commission they pay to their top introducers, with many now paying 100 per cent of the lender facility fee being charged (typically 2 per cent) to the introducing broker.
Shawbrook Bank, Precise Mortgages, Dragonfly, United Trust Bank, Masthaven, Omni Capital and others all increased commission payments during the year.
On the third day of Christmas my true love sent to me… Scottish lending
The number of bridging lenders happy to do deals north of the border has increased during 2013, with Lancashire Mortgage Corporation, Lowry Capital, Bridgebank Capital, Shawbrook Bank and Masthaven (amongst others) all actively lending in Scotland.
On the fourth day of Christmas my true love sent to me… bridge to let
Precise Mortgages launched a new hybrid product, which combined a standard bridging loan, with a buy-to-let term loan, which means investors no longer needed to source one provider for the bridging loan and a separate provider for the take-out mortgage.
The product starts life as a bridging loan and then after a minimum term of four months, converts to a buy-to-let term loan for up to 30 years, with no need for additional valuation or legal fees.
Better still, the same surveyor will reinspect the property, post refurbishment works and confirm the new after works value, with the lender allowing capital raising up to 75 per cent of the higher valuation.
Therefore, the investor can capital raise to get cash-out as soon as works are complete. Clever stuff.
On the fifth day of Christmas my true love sent to me… medium term lending
It is not strictly bridging but it is not mortgage term lending either. It is what the bridging industry have rather cleverly called medium term lending. With Omni, Dragonfly, United Trust Bank, Shawbrook Bank and others now offering medium term deals with terms from three to five years, this area of the short-term market has seen rapid growth during 2013.
On the sixth day of Christmas my true love sent to me new chief executive officers
The bridging industry’s two main trade bodies, the Association of Bridging Professionals and Association of Short Term Lenders have both seen new CEOs taking over, with Rob Jupp replacing Jonathan Newman as the new AOBP chairman and Benson Hersch replacing Adrian Bloomfield as the new ASTL chairman. Both trade bodies continue to do great work for the sector and continue to work with the regulator to bring about changes for the better in our sector.
On the seventh day of Christmas my true love sent to me Commercial Bridging Lending
The number of bridging lenders now more than happy to accept commercial property as security for higher LTV bridging transactions has increased drastically during the course of this year.
Shawbrook Bank has been there throughout the whole of the year with market-leading rates in the sector. Montello too remains a constant in this space, as do Alternative Bridging Corporation, Lancashire Mortgage Corporation.
Bridging heavy-weight Dragonfly entered the market aggressively in August of this year and others such as Masthaven, United Trust Bank and Bridgebank Capital have all increased appetite in the commercial sector, by increasing LTVs and lowering rates for commercial loans.
On the eigth day of Christmas my true love sent to me large loans
2013 has seen records broken for some seriously jumbo bridging loans being done and I am proud to say that one of largest transactions to complete in the year was written by Brightstar and funded by Precise Mortgages, with a gross loan of approx £17m being completed. By the end of 2013 the sector is estimated to be worth some £2bn in size and individual loans in the millions are frequently being recorded in the industry press.
On the 9th day of Christmas my true love sent to me new funds to market
August 2013 saw the first FCA approved, regulated bridging investment fund via Walker Crips, which provided additional capital to bridging lenders Mayfair Bridging, Bridgebank Capital and Century Capital. The first deal funded out of this scheme was completed by Mayfair Bridging on 19 September 2013.
In November of this year, Precise Mortages successfully completed a deal for £163m of AAA rated, UK property based assets, which was a milestone in the bridging sector, as the securitisation markets have been pretty much closed since the global credit crunch of 2008.
On the 10th day of Christmas my true love sent to me development finance
The number of development enquiries that we have seen pass across our new business desk this year has risen month on month. A lack of appetite to fund new build from the High Street lenders post credit-crunch, has seen the emergence of a number of new development lenders and products come to market, perhaps not surprisingly being funded by the existing bridging lenders – both new and old. The number of lenders with competitively priced products in this area, with a genuine appetite to lend for new build construction is nearly as long as the list of bridging lenders out there, including; Regentsmead, Masthaven, United Trust Bank, Mayfair Bridging, Dragonfly / Maslow, Titlestone, ABC and Aldermore – to name but a few!
On the 11th day of Christmas my true love sent to me regulation
With the European Commission’s directive on the mortgage market and MMR looming just over the horizon, the industry readies itself for regulatory changes with lenders on the mortgage, bridging and secured loan sides all preparing for D-Day. Lenders and brokers will have to the necessary permissions to continue to offer their products and services and it is likely that unless lenders are prepared to offer their competitors products as well, that they will no longer be able to offer an advised service. Bridging loans with a term with over 12 months will most likely have to be regulated, or capped at 12 months. The number of bridging lenders who are now able to offer regulated bridging loans has increased drastically during 2013, with the main regulated lenders being United Trust Bank, Precise Mortgages, Dragonfly, Masthaven, Bridgebank Capital, Mayfair Bridging, Affirmative and ABC.
On the 12th day of Christmas my true love sent to me Return of Cheval
One of the highlights of the year for me was to see the return to the market of Cheval, one of the industry’s original regulated bridging lenders, who sadly were forced to close after 17 years of business, due to losing their Clydesdale Bank funding lines.
The former regulated lender was purchased by Alternative Bridging Corporation in late October of this year and in the process, gained its FCA approval to offer regulated bridging loans, as well as acquiring a well known and well respected household name and brand. Within less than a year, Cheval is now able to return to market under the ABC brand and this shows just how resilient and adaptable the bridging industry is as a whole. I’m sure we will see much more of this lender during 2014 as they now have the platform to rival their competition.
I hope you’ve enjoyed my 12 Days of Bridging offering a round-up of the main bridging stories for 2013 and may I take this opportunity to wish all Mortgage Strategy readers a very Merry Christmas and a Happy and Prosperous New Year. See you all in 2014.