It’s been a month since my last Bridgingwatch so what’s been happening in the sector over the last four weeks?
Actually, that’s probably not the question to ask. What’s notbeen happening in bridging is more appropriate, as the sector has continued to go through the gears.
Since early December, there has been product innovation, even more competition on rates while loan volumes have continued to rise. But let’s start with rates.
Just last week, Shawbrook Bank took a hatchet to its rates and will have put its competitors on red alert in the process.
The rate on Shawbrook’s standard bridging product was slashed to 0.65 per cent per month for loans up to 60 per cent, and to 0.69 per cent pm for loans up to 70 per cent LTV. The lender also reduced rates on its short-term refurbishment bridge to 0.73 per cent per month.
This is a genuine statement of intent from Shawbrook, which said in a statement to the media that: “These changes demonstrate just how serious we are about becoming a major player in the short-term lending market for property professionals”.
If it continues to push into the market like this, then a major player Shawbrook almost certainly will be. What’s clear is that lenders cannot afford to rest on their laurels, or they’ll lose market share before they know it.
In other news, figures continue to emerge from the industry showing continued strong growth within short-term finance.
Dragonfly, for example, announced last week that it passed £500m of lending during January and has now completed on some 900 loans since its launch.
Meanwhile, West One Loans has observed how gross lending on term mortgages grew just 1.4 per cent between 2011 and 2012 while gross bridging lending rose by 72 per cent during the same period — around fifty times the growth.
Interestingly, chairman Duncan Kreeger noted how the trend of falling LTVs is in part a reflection of “evolving sources of demand”. In effect, credit-worthy, equity-rich borrowers who would not previously have considered bridging are now turning to it over “traditional sources of funding”.
The demographic is evolving by the day and that can only be a good thing for the industry moving forward. Bridging will always be a niche product but is becoming a pretty big niche.
In other news, Central Bridging Loans carried out a fascinating survey of brokers in January, getting their views on the bridging market. The key finding for me was that most brokers feel the negative perception of bridging remains its biggest problem.
They’re not wrong, either. It’s unfortunate that the public as a whole still do not know how much the sector has progressed in recent years. Over time this will change, I’m sure, but the sector has to be patient. In time, the public will come to understand its new professionalism.
One survey result that I didn’t quite understand was that most brokers believe lenders tightening their criteria is the second biggest problem in the sector. I for one have not seen any evidence of this. If anything, in fact, lenders have relaxed their criteria.
The other finding that leapt out at me was that brokers ranked speed of decision making almost twice as important as rate. After all, rates are great but they are meaningless if a lender can’t pull a deal together in quick time.
Thankfully, speed of decision-making and turnaround is an area where most lenders have improved considerably in recent years.