The short term finance market is very diverse and getting reliable statistics is not easy but theAssociation of Short Term Lenders collects data from its members who have witnesses a 49% growth in lending year on year from March 2014 to March 2015.
So why is bridging finance becoming more important?
Danny O’Sullivan, Head of bridging Finance at Stirling Partners Finance believes there are three main reasons for this.
1. Regulatory and Fiscal
“The introduction of MMR in April 2014 led to tighter affordability checks in the conventional mortgage market. This has no doubt caused some sales to fall through or be delayed and this has resulted in some sellers using bridging finance to avoid losing the new property they are buying. In the London market in particular changes to Stamp Duty tax and pre-election fears of a mansion tax caused additional delays as buyers held back.”
2. Changes in the lending landscape
“High Street lenders are still very cautious in supporting property professionals and anybody seeking funding has to consider a more varied market that includes traditional lenders, new challenger banks and crowd funding.
Some of the newer lenders such as Precise, Shawbrook, Dragonfly and United Trust have sharpened up competition on rates and criteria in the bridging sector and have been able to cope with the changing regulatory environment. With rates widely available as low as 0.59% Per Month bridging is beginning to lose its expensive tag. “
3. Property people making profits by buying again
“It’s still a strange market with interest rates at 0.5% above base but 2007 was eight years ago and people want to do deals. Property professionals need to buy properties quickly and efficiently to get them at a good price and bridging finance can make sense when there is profit to be made from;
- Change of use
- Lease extension
Once these changes have been achieved (sometimes in only a few months) bridging finance can be replaced with cheaper long term finance or the property can be sold at a good profit.”