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Bridgingwatch – Danny Waters – March 2012

It’s been another busy month in bridging. Adrian Bloomfield’s resignation as chief executive officer of the Association of Short Term Lenders came just before the trade body announced that it will be publishing its own lending data.

Once the numbers are out, we will know whether they’re the statistical equivalent of a Kia Cee’d or a Bugatti Veyron.

Industry politics aside, any data that can relay the growth and dynamism of the bridging sector should be welcomed.

It will be interesting to see how often the ASTL’s numbers will be published and how they will be reported. Will they portray the sector accurately?

One debate that continues to rage is dual representation. Whatever your views on this, it’s another example of the innovation within short-term lending.

Yes, it is untried and untested, but over time we will see whether it’s a positive or negative development for the sector.

As I see it, anything that can help drive and speed up should be welcomed.

Another positive for the industry – well, for borrowers and intermediaries anyway – is the continuing downward pressure on rates.

Headline rates these days are typically around 0.7%, which is half what they were as little as two years back.

This is bringing more people into the sector and again putting bridging closer to the mainstream.

Or is it really a positive? Could the short-term rush to secure business by taking an axe to rates actually damage the industry long-term?

Lenders should price for risk, not just for rate.

I fear the cannibalisation of rates could create structural problems for some lenders further down the line.

I never thought I’d say this, but maybe falling rates aren’t such a good thing after all when they get to a certain level anyway.

Last but not least, it would be impossible to write an article this week without referring to the Budget.

The announcement perhaps closest to the bridging sector is the Stamp Duty increase to 15% on properties being purchased through corporate entities.

Dragonfly Property Finance’s chief executive officer Jonathan Samuels hit the nail on the head when he said that while closing loopholes is all well and good, the worry on this occasion is the potential for collateral damage across the property sector as a whole.

A lot of bridging deals are done in company envelopes, as the chancellor refers to them, which helps them to reduce tax.

The new rate of Stamp Duty could see a lot of these deals come unstuck, with investors deterred by the increased Stamp Duty they have to pay.
Now I don’t think it’s going to set the sector back in any material way but it’s certainly a bit of a disappointment.

The chancellor is right to target morally repugnant tax avoidance but he is wrong to hit genuine investors in housing stock.

Hot products

  • Shawbrook bank’s industry-leading rate at 7.45% above three-month libor up to 65% ltv. For purchases only.
  • Dragonfly property finance – medium-term second charge loans starting at 9.9%.
  • Precise mortgages’ regulated bridging deal from 0.75% with interest rolled up, not deducted.
  • Masthaven has launched a development product which includes complete new-build not just refurbishment.

Deal makers

  • Tiuta Completed a £2m large bridging loan deal on a residential property valued at £3m. The property is based in a prime London area and was funded through Tiuta’s large loan funding line. 
  • Shawbrook bank Completed a £1.5m loan within five working days for a luxury residential property developer based in Surrey.
  • Dragonfly property finance Completed a £6.2m loan secured against a property in London’s ever-popular Chester Square. The turnaround was particularly impressive as the loan was available in 10 days.

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