Bridging funds more homes than Help to Buy

Since April 2013 government equity loans have reached £941m for the supply of new homes in the first phase of Help to Buy compared to £2.38bn lent by the bridging loan sector.

Duncan Kreeger, director of West One Loans, commented: “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.

“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.”

On a gross annual basis, bridging loans totalled £2.06bn to the 12 months to May, 17.9% higher than the previous 12 months.

The pace of recent growth has slowed however, with lending growing at an average rate of 0.8% per month since 1 March. If this continued over the course of a year annual growth would stand at 10%.

Duncan Kreeger added: “Meteoric expansion in recent years is only the start of a new era. This reinvigorated industry has built a solid foundation for further growth.

“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.”

Bridging loans are growing not only in number but also in size with the average loan reaching £457,000 in the 12 months to May, 10.7% larger than the previous 12 months when it stood at £404,000.

The bridging industry appears to be playing it safer, as loan to value ratios across the industry have reached their lowest point on record.

In the past two months LTVs have averaged just 41.0%, down from 45.2% in the previous two month period to 1 March.

Duncan Kreeger said: “Bridging is now more stable than ever before – while the industry is lending record amounts.

“This leaves plenty of capacity for even higher gross lending later this year.”