The latest West One Bridging Index has found that since June 2013 the annual rate of growth in gross bridging lending has averaged 25.1%, representing a significant stabilisation in the market.
Between March 2012, when annual growth figures were first available from the West One Bridging Index, and June 2013, annual growth in bridging lending averaged 56.3%. However, during this time every individual recorded period saw growth that varied from the average rate by at least 10 percentage points.
West One said the latest annual growth is well within the bounds of the new regime, standing at 22% in the twelve months to 1 September compared to the previous 12-month period.
Gross annual bridging lending in the UK now stands at a new record of £2.23 billion, as of 1 September 2014.
In the preceding 12-month period, ending 1 September 2013, annual gross lending stood at £1.83 billion.
On a bi-monthly basis, the two-month period ending 1 September saw £452 million in gross lending, up 21% from £374 million in the same two months in 2013.
Duncan Kreeger, director of West One Loans, said: “In a world returning to economic hope, there will be even sharper demand for imaginative finance as we saw in a world paralysed by financial fear.
“So bridging lending continues to grow, and reaches a fresh record practically every month. But bridging is also securing a new, more reliable mode of expansion to fit a new, more professional and competitive industry.
“The latest record has been achieved in line with that new mood As detailed in the previous West One Bridging Index, industry growth picked up again over the summer, after a slightly slower period in the spring. And since then bridging lenders have continued that pattern of solid progress. Looking ahead to the end of the year and into 2015 this reliable expansion looks set to continue.”
Growing numbers of loans are powering growth in total bridging lending alongside larger loan sizes; however, growth in the number of loans is the most significant of these factors. Industry loan volumes over the last 12 months have grown by 23.2% compared to the previous year ending 1 September 2013.
Meanwhile the size of individual loans has grown slightly more gradually. Average loan sizes now stand at £497,000 over the 12 months to 1 September, up 15.9% from £429,000 in the previous 12 months.
Average loan to value ratios have increased to a 12-month average of 47.3%, up considerably from the low of 46.5% witnessed over the previous 12 months, ending 1 July 2013.
Kreeger said: “Bridging loans are still covered twice over by the value of their security, and that doesn’t look set to change dramatically any time soon.
“With renewed prosperity and optimism, lenders must also temper the mood of expansion with caution. But today’s most successful bridging lenders cut their teeth in the recession and know how to manage risk.
“All the evidence suggests that bridging lenders are making a conscious decision to back up their support for dynamic projects with solid security.”
Meanwhile, bridging interest rates have averaged 1.17% over the year to 1 September 2014, down by seven basis points from the previous 12-month period, when this stood at 1.25%.
However, most recently, on a bi-monthly basis rates have in fact risen from 1.14% over the previous two months to 1.16% over the last two months ending 1 September.
Kreeger added: “When the right funding lines are available and borrowers can secure the investment they need more cheaply, this makes more real life projects possible.
“Fundamentally that’s what bridging is about. So while the cheapest loans aren’t always appropriate, and lenders must judge deals on a case-by-case basis, lower average interest rates are great news for borrowers – and are allowing short-term secured finance to support the property industry more widely.”
