Bridging loan market remains strong in 2022
Research conducted by the ASTL and EY Financial Services, report that the bridging market continues to see strong growth in 2022 – and is maintaining its upward trend as the year draws to a close.
Bridging loans are primarily used by people who need access to finance while waiting on funds from the sale or refinance of an existing asset. They can be used to ‘bridge the gap’ if you need to buy one property before selling another. It is a form of short-term lending that allows the borrower to purchase, refinance or refurbish an asset in a short period of time.
Research conducted on members of The Association of Short Term Lenders (ASTL), shows applications for bridging finance have risen throughout 2022, achieving a 5.4% rise in Q3 vs. Q2. Loan books also reached a new high seeing a 1.5% rise. Looking back, ASTL figures demonstrate that bridging loan completions have now been more than £1bn for six consecutive quarters.
Qtr 30 Sept22 Vs. 30 Jun22 | Qtr 30 Sept22 Vs. 30 Sept21 | YE 30 Sept22 Vs. 30 Sept21 | |
---|---|---|---|
Loans Written (£) | +15.9% | +36.2% | +24.1% |
Loan Book (£)* | +1.5%* | +21.5% | +21.5%* |
Applications (£) | +5.4% | +2.7% | +18.1% |
Loans in Default (£)* | (3.0)% | +3.2% | +3.2% |
*As at the end of the period **This research was based on ASTL members and only represents part of the market.
The Association of Short Term Lenders (ASTL)
The ASTL was created to protect and promote its members and ensure they abide by a set code of conduct for their product offering of short-term bridging and secured loans. The association will also collect and share industry insights and statistics, work with regulatory authorities and comment on market trends.
ASTL CEO, Vic Jannels said: “The latest ASTL Data Survey shows another very strong set of results, with continuing growth in bridging applications, completions and loan books. In fact, even amidst economic uncertainty, the value of loan books reached a record level of just over £6.1bn and this is the second consecutive quarter where total books have been more than £6bn. At the same time, the average LTV remains less than 60%, which indicates that lending continues to be robust and responsible. The market is demonstrating its resilience and ability to serve a wide variety of customers with flexible short term lending solutions.” (ASTL 2022)
EY Financial Services Survey 2022
This data is in-line with predictions made earlier in the year by EY Financial Services. 85% of participants in the study agreed that the UK bridging market was set to either stay the same or increase in 2022. This report indicates an “appetite for larger loans” despite credit concerns as a result of Covid-19, which is also contributing to the overall market increase.
While average days to total repayment of bridging loans increased in 2021, the EY Financial Services report predicated a decrease in anticipated loan terms in 2022. Following this trend, Onyx has found that our current bridging loan repayment term is 9-months - a decrease on the 13-month average seen the previous year.
The trend in loan originations is also seeing a shift. Previously, broker-related channels had the majority share of bringing borrowers to their lenders, but a change in the tides is observing an upward trend in ‘direct to customer’ activity – double that seen in 2021! Other acquisition sources such as aggregator websites and third-party referrals have only seen small movements.
Refurbishments continue to be the primary use of bridging loans in the wider market, however, this is not the case for Onyx. While Onyx provides bridging loans for refurbishments, it is other purposes such as securing land, property purchases and temporary refinancing of existing assets that make up the majority of our bridging loan book.
Bridging Loan Market Changes
With the current unpredictability we are seeing in most markets, we will likely observe more shifts within the bridging loan market, but as the figures quoted above show, the market continues to grow. Onyx is dedicated to keeping on top of all trends and concerns and reacting accordingly. We are pleased to continue to offer the same rates of interest despite the recent rises in the England Bank Rate, offering competitive LTV’s of up to 75%.
Onyx has extensive knowledge in offering bridging loans to suit all purposes. We are experts in the field of providing financial solutions for property professionals in a range of circumstances. Speak to us today and get your project up and running before you know it: info@onyxmoney.co.uk.
References
1. ASTL quote and table from https://theastl.org/index.php/2022/11/28/bridging-market-continues-strong-growth-in-q3-2022/
2. EY Financial Services figures from https://assets.ey.com/content/dam/ey-sites/ey-com/en_uk/generic/ey-uk-bridging-market-study/ey-2022-uk-bridging-market-study.pdf