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Bridging Loans - UK - August 2015

“Although the bridging loans industry has traditionally been largely unregulated, stricter regulation in the wider lending market has led to many bridging lenders becoming wary of their operations, though they are still taking full advantage of opportunities presented.”

– Lewis Cone, B2B Analyst

This report answers the following key questions:

  • What are the key determinants driving the bridging loans industry?
  • Was the market affected by the financial crisis? Has there been any structural changes as a consequence?
  • Has regulation restricted industry development?
  • Can the sector withstand competition from other lenders in the years ahead?
  • What does the future hold for bridging finance?

The sector has shown strong growth over tt 12 months and expectations are high for the remainder of this year and 2016.he las The time when bridging loans were just used to ‘bridge the gap’ between a purchase and the sale of a residential property are over. There has been an increase in reasons why short-term liquidity is required by borrowers, which has expanded the number of bridging finance lenders and the diversity of products. Even as mainstream lenders start to expand operations again, including major banks, the increase in regulatory measures and the convenience of bridging finance means the sector is unlikely to diminish in importance for the foreseeable future. 

A bridging loan is a flexible, short-term loan usually secured against property, where the borrower agrees to pay back the loan plus interest by an agreed date. They are typically used to provide finance for property purchases while a borrower is awaiting the completion of a contingent sale of an existing property, or simply where other finance is scarce.

Since bridging loans are usually offered on the basis of the security and the proposed exit rather than the borrower’s ability to meet regular repayments, bridging can assist in a wide variety of situations.

The following sectors make up a large proportion of the bridging loans market and are quantified in this report:

  • Residential 
  • Commercial 
  • Development 
  • Second Charge
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Table of contents

  1. Executive Summary

      • Market size
        • Figure 1: UK bridging loans market value, in aggregated loan balances, 2011-2015, (£ billion)
        • Figure 2: UK bridging loans market value segmentation, in aggregated loan balances, by sector, 2011-2015, (£ billion)
      • Market trends
        • Market factors
          • Regulation changes yet to affect large proportion of market
            • Continued struggles by mainstream lenders to provide finance to SMEs and legislative changes have peaked bridging lenders’ interest
              • Property market continues offer greatest opportunity for industry growth
                • Industry structure
                  • Forecast
                    • Aggregated loan balances are forecast to increase by 82% to 2020, albeit at a diminishing annual growth rate
                      • Figure 3: Forecast UK bridging loans market value, in aggregated loan balances, 2016-2020, (£ billion)
                    • A stable business environment and a gradual slowdown in the property market will support commercial and development loans
                      • Figure 4: Forecast UK bridging loans market value segmentation, in aggregated loan balances, by sector, 2016-2020, (£ billion)
                    • What we think
                    • Key Insights

                        • Which factors have led to the industry emerging as a serious competitor to mainstream lenders?
                          • How have changes in lending regulation affected the bridging industry?
                            • Are P2P lenders a credible threat to industry development?
                              • What will be the key market drivers?
                              • Introduction

                                  • Definitions
                                    • Methodology
                                      • Abbreviations
                                        • Market positioning
                                        • UK Economy

                                          • Key points
                                            • Overview
                                              • Figure 5: UK GDP, 2004-2015 Q1, (% quarterly growth and GDP in £ billion)
                                              • Figure 6: Quarters after GDP peak, 1979, 1990 and 2008, (Number of quarters and GDP as % of pre-downturn peak)
                                            • Inflation
                                              • Interest rates
                                                • House prices
                                                  • Consumer spending
                                                    • Manufacturing
                                                      • Business investment
                                                        • Figure 7: UK GFCF 2003-15, (£ million)
                                                      • Imports
                                                        • Exports
                                                        • Market Factors

                                                          • Key points
                                                            • Output growth slows at the start of 2015
                                                              • Figure 8: GDP growth rate, 2012-15, (% change on previous quarter)
                                                              • Figure 9: GDP growth rate, 2012-2015, (% change on previous quarter)
                                                            • Property market continues to offer greatest opportunity for industry growth
                                                              • Figure 10: Number of residential property transactions, 2010-14, (seasonally adjusted)
                                                              • Figure 11: Number of residential property transactions, 2010-2014, (Number, seasonally adjusted)
                                                              • Figure 12: Number of non-residential property transactions, 2010-14, (Number, seasonally adjusted)
                                                              • Figure 13: Number of non-residential property transactions, 2010-2014, (Number, seasonally adjusted)
                                                            • Misconceptions about bridging finance continue to restrict development
                                                              • Continued struggles by mainstream lenders to provide finance to SMEs and legislative changes have peaked bridging lenders’ interest
                                                                • Figure 14: Company insolvencies in England and Wales, 2010-14, (Number)
                                                                • Figure 15: Company insolvencies in England and Wales, 2010-2014, (Number)
                                                              • Associations have helped promote the industry’s position in the alternative finance market
                                                                • Regulation
                                                                  • The EU Mortgage Credit Directive
                                                                    • Buy-to-let mortgages
                                                                    • Market Size

                                                                      • Key points
                                                                          • Figure 16: UK bridging loans market value, in aggregated loan balances, 2011-2015, (£ billion and % annual change)
                                                                          • Figure 17: UK bridging loans market value, in aggregated loan balances, 2011-2015, (£ billion)
                                                                        • Market segmentation
                                                                            • Figure 18: UK bridging loans market value segmentation, in aggregated loan balances, by sector, 2011-2015, (£ billion)
                                                                            • Figure 19: UK bridging loans market value segmentation, in aggregated loan balances, by sector, 2011-2015, (£ billion)
                                                                            • Figure 20: UK bridging loans market value segmentation, in aggregated loan balances and by loan purpose, 2015, (£ billion, % of bridging loans)
                                                                            • Figure 21: UK bridging loans market value segmentation, by loan purpose, 2015, (% of bridging loans)
                                                                            • Figure 22: AOBP market report, by lender and loan business volume, November-December 2012, (% of total cases, % of total completions and £000)
                                                                            • Figure 23: AOBP market report, by lender and loan business volume, November-December 2012, (£000)
                                                                        • Market Trends

                                                                          • Key points
                                                                            • Regulation
                                                                              • Threat of other emerging alternative lenders
                                                                                • Technology advances
                                                                                  • Property boom drives growth
                                                                                    • Figure 24: Halifax and Nationwide House Price Index, by annual change per quarter, Q1 2007-Q2 2015, (%)
                                                                                    • Figure 25: Halifax and Nationwide House Price Indices, by annual change per quarter, Q1 2007-Q2 2015, (%)
                                                                                  • Other trends
                                                                                    • Figure 26: AOBP bridging market trend report, by sector, average loan-to-value, June 2013-June 2015, (%)
                                                                                    • Figure 27: AOBP bridging market trend report, average loan-to-value, June 2013-June 2015, (%)
                                                                                    • Figure 28: AOBP bridging market trend report, average interest rate, June 2013-June 2015, (%)
                                                                                    • Figure 29: AOBP bridging market trend report, average interest rate, June 2013-June 2015, (%)
                                                                                    • Figure 30: ASTL gross mortgage lending estimates, 2012-2015, (£ million and %)
                                                                                    • Figure 31: ASTL gross mortgage lending estimates, 2012-2015, (£ million and %)
                                                                                • Industry Structure

                                                                                  • Key points
                                                                                    • Industry development
                                                                                    • Company Profiles

                                                                                      • Alternative Bridging Corporation

                                                                                            • Figure 32: Financial analysis of alternative bridging corporation limited, 2010-2014, (£ 000)
                                                                                          • Company outlook
                                                                                          • Amicus Finance (formerly Capital Bridging Finance)

                                                                                                • Figure 33: Financial analysis of Amicus (formerly Capital Bridging Finance), 2010-2014, (£ 000)
                                                                                              • Company outlook
                                                                                              • Boost Capital (formerly Business Financial Services (UK))

                                                                                                    • Figure 34: Financial analysis of Boost Capital (formerly Business Financial Services (UK)), 2012-2013, (£ 000)
                                                                                                  • Company outlook
                                                                                                  • Commercial Acceptances

                                                                                                        • Figure 35: Financial analysis of Commercial Acceptances, 2010-2014, (£ 000)
                                                                                                      • Company outlook
                                                                                                      • Dragonfly Property Finance

                                                                                                            • Figure 36: Financial analysis of Bridgeco Ltd, 2009-2013, (£ 000)
                                                                                                            • Figure 37: Financial analysis of Fern Trading Ltd, 2011-2014, (£ 000)
                                                                                                            • Figure 38: Financial Analysis of Rednel, 2013-2014, (£ 000)
                                                                                                          • Company outlook
                                                                                                          • Goldentree Financial Services

                                                                                                                • Figure 39: Financial analysis of Goldentree Financial Services, 2010-2014, (£ 000)
                                                                                                              • Company outlook
                                                                                                              • Hope Capital

                                                                                                                  • Company outlook
                                                                                                                  • Lancashire Mortgage Corporation

                                                                                                                        • Figure 40: Financial analysis of Lancashire Mortgage Corporation , 2010-2014, (£ 000)
                                                                                                                      • Company outlook
                                                                                                                      • MTF Finance

                                                                                                                          • Company outlook
                                                                                                                          • United Trust Bank

                                                                                                                                • Figure 41: Financial analysis of United Trust Bank, 2010-2014, (£ 000)
                                                                                                                              • Company outlook
                                                                                                                              • West One Loans

                                                                                                                                    • Figure 42: Financial analysis of West One Loans, 2009-2013, (£ 000)
                                                                                                                                  • Company outlook
                                                                                                                                    • Figure 43: Profiled companies’ combined turnover, 2010-2014, (£ million)
                                                                                                                                • Forecast

                                                                                                                                  • Key points
                                                                                                                                      • Figure 44: Forecast UK bridging loans market value, in aggregated loan balances, 2016-2020, (£ billion and % annual change)
                                                                                                                                      • Figure 45: Forecast UK bridging loans market value, in aggregated loan balances, 2016-2020, (£ billion)
                                                                                                                                      • Figure 46: Forecast UK bridging loans market value segmentation, in aggregated loan balances, by sector, 2016-2020, (£ billion)
                                                                                                                                      • Figure 47: Forecast UK bridging loans market value segmentation, in aggregated loan balances, by sector, 2016-2020, (£ billion)
                                                                                                                                    • Mixed prospects in property market for lenders
                                                                                                                                      • Favourable conditions for rival alternative lenders threaten potential industry development
                                                                                                                                      • Further Sources and Contacts

                                                                                                                                        • Trade associations
                                                                                                                                          • Trade magazines
                                                                                                                                            • Trade exhibitions

                                                                                                                                            Companies Covered

                                                                                                                                            To learn more about the companies covered in this report please contact us.

                                                                                                                                            Bridging Loans - UK - August 2015

                                                                                                                                            US $1,282.26 (Excl.Tax)