Traditional mortgages outpaced by bridging loans in the UK reports show for early 2013

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Report by Hanover Square Brokers

Growth in secured short-term lending is dramatically outpacing traditional mortgages by a factor of 50, it has been claimed. The popularity of bridging loans has increased annually by 72% compared to 1.4% with mortgages and was responsible for funding £1.57 billion in 2012 and will that will likely grow to more than £2 billion this year.

In todays depressed property market, it’s a common belief that securing finance such as a traditional mortgage to fund the purchase of a property is fraught with difficulty. Business Secretary, Vince Cable recently admitted that the Government’s Funding for Lending Scheme has failed small businesses.

Bridging loans are a way to quickly secure funding to buy a residential or commercial property. They’re intended as a method of short term financing (between a one to 12 month period) and are usually more expensive than traditional mortgages due to the increased risk. Typically they require some form of security up front such as a residential or commercial property in any size or condition.

Many in the industry have commented that they’re being approached by an increasing number of clients for second charge and bridging loans who normally wouldn’t use such methods for funding due to mainstream lenders continuing cautiousness. Duncan Kreeger, chairman of West One Loans recently commented in an article for the Financial Reporter that:

“As it matures, the bridging industry is taking on bigger and bigger projects. This is because high street banks are keeping their criteria so tight they’re effectively ruling out any ventures that could be classed as development. That would have left thousands of prime investment opportunities high and dry – if it wasn’t for alternative finance - Bridging loans are decided on a case-by-case basis. Especially for peer-to-peer bridgers, it’s the real value of security that matters, not just the purchase price or an automated valuation.”

The fast growing nature of the sector presents numerous challenges and requires responsible lenders. Bespoke finance brokerage firms such as Hanover Square Brokers help take the hard work out of financing property purchases and development. They act as a broker for bridging loans; a fast, effective and highly efficient method to secure short-term financing in property deals.

The benefits of going with a broker like Hanover Square are numerous. They have established relationships with all the major lenders and have a great understanding of the market, enabling them to find the best solution for your needs. The exceptional growth in the industry is leading to ever more competitive rates. On an annual basis annual basis rates have fallen to 1.35% in the last quarter of 2012 from 1.42% in 2011.

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William Bagnall
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