Bridging loans to break £1bn barrier, West One
Spike in lending to residential property investors contributes to highest figure in preceding 12 months.
Gross lending in the bridging loan industry in the 12 months to March 2012 rose to £1.1bn, 21 per cent higher than in the previous 12-month period, data from West One’s quarterly bridging index have shown.
The bridging lender attributed the increase to a surge in lending to residential property investors, after “soaring funding costs” led banks to scale back their own lending to such clients.
Gross lending in the first quarter of 2012 was £382m, 95 per cent higher than in the first quarter of 2011, and 30 per cent higher than the previous quarter. West One predicted that if the pace of growth continues along its current trajectory, gross lending in 2012 will hit £1.5bn, an increase of 68 per cent from 2011.
The number of loans advanced in Q1 2012 was 74 per cent higher than during the same period last year, reflecting the increasing appetite for bridging loans over the past twelve months. The number of loans fell marginally by 8 per cent between Q4 2011 and Q1 2012, “in line with the traditional winter slow down”.
The average loan size rose sharply from £342,000 in the first quarter of 2011 to £412,000 in Q1 2012, an increase of over 20 per cent. The bridging lender said this reflects the bigger projects being tackled by property investors.
Duncan Kreeger, chairman of West One Loans, said: “A big funding gap has been created by the problems high street lenders are having with increasing funding costs, increasing capital requirements, and heavy exposure to toxic assets.
“As a result the high street simply can’t cater for the high demand from property investors for residential loans. It has created a huge gap between supply and demand that could become even wider if the economy fails to recover with any conviction.
“Net mortgage lending will only be around £5bn this year: The main market is still crippled, and if the eurozone crisis worsens mortgage lending could enter a state of near-paralysis.”