Buy-to-let investments are the most popular use for alternative lending, according to a poll of financial intermediaries carried out by West One Loans.
In the recent survey of 350 mortgage brokers conducted by the bridging lender, 36% of intermediaries listed buy-to-let as the most popular use for bridging loans. This has increased dramatically from just 23% in the West One Broker Sentiment Survey in August 2012.
Duncan Kreeger, director at West One Loans, said: “A generation of renters are demanding somewhere to live – and a growing army of landlords need loans to make the required investments. The latest sky-high rental figures demonstrate that hunger for more investment. But cash-strapped banks are still hesitant to make a serious commitment. The supposed upturn in traditional lending isn’t meeting this need. And unless someone is willing to put their money where their mouth is, that won’t change. That’s why alternative finance and peer-to-peer lending models are proving so popular. Particularly since deals can be done in days rather than months.”
However, 76% of brokers surveyed said their mainstream mortgage clients do not understand the industry or the processes involved.
Kreeger said: “Even when a bridging loan is the most appropriate solution, it’s clear that the overwhelming majority of borrowers would struggle to understand the practicalities – or the opportunities. Brokers are increasingly able to provide support.
“But the rise of alternative finance for buy-to-let investments illustrates just how many property investors could have made use of bridging but are currently missing out.”
More brokers are seeing an expansion of alternative finance. 79% of brokers saw their own bridging business increase, compared to 72% in November.
According to intermediaries, the bridging industry as a whole has seen growth of 49% over the last twelve months. This compares to 51% reported annual growth in November, and 46% in August 2012.
Kreeger said: “Gross bridging lending smashed the £1.5 billion mark at the end of last year. Brokers certainly agree that this will keep rising, even if at a slightly more sustainable rate.
“Also, as our partners on a daily basis, it’s encouraging to see the opportunities of a growing industry split between a bigger proportion of brokers.”