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Bridging Loans - UK - July 2016

“Bridging has provided a vital resource to those looking to secure immediate finance. The industry’s substantial growth over the last seven years suggests that the scope for innovation and collaboration between lenders and brokers will expand alongside awareness of how bridging finance can be useful in a range of scenarios, which will only increase growth potential.”

Lewis Cone, B2B Analyst

This report answers the following questions:

  • Will an increase in regulation help or restrict future market development?
  • What can the industry do to ensure growth levels remain on the right path?
  • Which areas provide the industry with further growth opportunities?

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, 2012-16, (£ billion)
      • Development loans drive market growth
        • Figure 2: UK bridging loans market value segmentation, in aggregated loan balances, by sector, 2012-16, (£ billion)
      • Mortgage delays represent most common use of loan
        • Figure 3: UK bridging loans market value segmentation, by loan purpose, 2016, (% of bridging loans)
      • Market trends
        • Increased market competition driving a ‘rates war’
          • SMEs increasingly turning to bridging to fulfil financing needs
            • Lower average LTVs found later in the year
              • Figure 4: AOBP bridging market trend report, average loan-to-value, September 2013-March 2016, (%)
            • Interest rates have stabilised over the last few years
              • Market expansion not reflected in share of total mortgage lending
                • Market factors
                  • Thriving property market drives growth development opportunities...
                    • ...with changes to planning laws offering further lending opportunities
                      • Insufficient SME lending by mainstream sources and eight-year low insolvency numbers of notable interest to bridging industry
                        • Industry structure
                          • Forecast
                            • Aggregated loan balances are forecast to increase by 69% to 2021, albeit at a somewhat stable annual rate
                              • Figure 5: Forecast UK bridging loans market value, in aggregated loan balances, 2017-21, (£ billion)
                            • Development and second charge loans expected to drive growth
                              • Figure 6: Forecast UK bridging loans market value segmentation, in aggregated loan balances, by sector, 2017-21, (£ billion)
                            • What we think
                            • Key Insights

                                • Will an increase in regulation help or restrict future market development?
                                  • What can the industry do to ensure growth levels remain on the right path?
                                    • Which areas provide the industry with further growth opportunities?
                                    • Introduction

                                        • Definitions
                                          • Methodology
                                            • Abbreviations
                                              • Market positioning
                                                • Industry bodies helping enforce standards and educate the wider lending sector about bridging finance
                                                • UK Economy

                                                  • Key points
                                                    • Overview
                                                      • Figure 7: UK GDP, 2005-15, (% quarterly growth and GDP in £ billion)
                                                      • Figure 8: UK output, by industry, 2008-16, (Index 2012 = 100)
                                                      • Figure 9: Quarters after GDP peak, 1979, 1990 and 2008, (Number of quarters and GDP as % of pre-downturn peak)
                                                    • Inflation
                                                      • Interest rates
                                                        • House prices
                                                          • Figure 10: UK house price changes, 2004-16, (12-month % change)
                                                        • Consumer spending
                                                          • Manufacturing
                                                            • Figure 11: UK manufacturing, 2013-16, (Index, 2012 = 100)
                                                          • Business investment
                                                            • Figure 12: UK GFCF 2003-15, (£ million)
                                                          • Imports
                                                            • Exports
                                                            • Market Factors

                                                              • Key points
                                                                • Market uncertainty likely to drive slowdown in growth
                                                                  • Figure 13: GDP growth rate, Q1 2012-Q1 2016, (% change on previous quarter)
                                                                  • Figure 14: GDP growth rate, Q1 2013-Q1 2016, (% change on previous quarter)
                                                                • Thriving property market drives growth development opportunities...
                                                                    • Figure 15: Number of residential property transactions, 2011-15 (Number, seasonally adjusted)
                                                                    • Figure 16: Number of residential property transactions, 2011-15, (number, seasonally adjusted)
                                                                    • Figure 17: Number of non-residential property transactions, 2011-15, (Number, seasonally adjusted)
                                                                    • Figure 18: Number of non-residential property transactions, 2011-15, (number, seasonally adjusted)
                                                                  • ...with changes to planning laws offering further lending opportunities
                                                                    • Insufficient SME lending by mainstream sources and eight-year low insolvency numbers of notable interest to bridging industry
                                                                        • Figure 19: Company insolvencies in England and Wales, 2011-15, (number)
                                                                        • Figure 20: Company insolvencies in England and Wales, 2011-15, (number)
                                                                      • Associations have helped promote the industry’s position in the alternative finance market
                                                                        • Legislation and regulation
                                                                          • The EU Mortgage Credit Directive
                                                                            • Buy-to-let mortgages
                                                                              • The Small Business, Enterprise and Employment Act
                                                                                • Stamp duty changes
                                                                                • Market Size

                                                                                  • Key points
                                                                                    • Diminishing growth seen in recent times, but healthy competition could boost levels once more
                                                                                      • Figure 21: UK bridging loans market value, in aggregated loan balances, 2012-16, (£ billion and % annual change)
                                                                                      • Figure 22: UK bridging loans market value, in aggregated loan balances, 2012-16, (£ billion)
                                                                                  • Market Segmentation

                                                                                    • Key points
                                                                                        • Figure 23: UK bridging loans market value segmentation, in aggregated loan balances, by sector, 2012-16, (£ billion)
                                                                                        • Figure 24: UK bridging loans market value segmentation, in aggregated loan balances, by sector, 2012-16, (£ billion)
                                                                                      • Loan purpose
                                                                                        • Figure 25: UK bridging loans market value segmentation, by loan purpose and in aggregated loan balances, 2015 and 2016, (% of bridging loans and value in £ billion
                                                                                        • Figure 26: UK bridging loans market value segmentation, by loan purpose, 2016, (% of bridging loans)
                                                                                    • Market Trends

                                                                                      • Key points
                                                                                        • Increased market competition driving a ‘rates war’
                                                                                          • Development finance: market competition or new opportunity?
                                                                                            • SMEs increasingly turning to bridging to fulfil financing needs
                                                                                              • Bridging making property growth its own
                                                                                                • Figure 27: Halifax and Nationwide House Price Index, by annual change per quarter, Q1 2008-Q1 2016 (%)
                                                                                                • Figure 28: Halifax and Nationwide House Price Indices, by annual change per quarter, Q1 2008-Q1 2016, (%)
                                                                                              • Other industry trends
                                                                                                • Lower average LTVs found later in the year
                                                                                                  • Figure 29: AOBP Bridging Market Trend Report, by sector, average loan-to-value, September 2013-March 2016 (%)
                                                                                                  • Figure 30: AOBP Bridging Market Trend Report, average loan-to-value, September 2013-March 2016, (%)
                                                                                                • Interest rates have stabilised over the last few years
                                                                                                  • Figure 31: AOBP Bridging Market Trend Report, average interest rate, September 2013-March 2016, (%)
                                                                                                  • Figure 32: AOBP Bridging Market Trend Report, average interest rate, September 2013-March 2016, (%)
                                                                                                • Market expansion not reflected in share of total mortgage lending
                                                                                                  • Figure 33: ASTL gross mortgage lending estimates, 2012-16, (£ million and %)
                                                                                                  • Figure 34: ASTL gross mortgage lending estimates, 2012-16, (£ million and %)
                                                                                              • Industry Structure

                                                                                                • Key points
                                                                                                  • Industry development
                                                                                                    • Industry emerges as other lending streams are hit by the impact of the recession...
                                                                                                      • ... although bridging’s own funding structure also had to adapt to difficult conditions
                                                                                                        • Borrowers now use bridging for a variety of reasons
                                                                                                          • Scotland targeted for new lending opportunities
                                                                                                            • Increase in regulation leading change in lending activity
                                                                                                              • Duration and size of loans are on the rise
                                                                                                                • New entrants could do more harm than good
                                                                                                                  • Significant movements highlight diversifying industry structure
                                                                                                                      • Figure 35: Bridging lenders’ activity and product detail, by lender, 2016
                                                                                                                  • Company Profiles

                                                                                                                    • Aldermore Bank

                                                                                                                          • Figure 36: Financial analysis of Aldermore Bank plc, 2011-15, (£ million
                                                                                                                        • Company outlook
                                                                                                                        • Alternative Bridging Corporation

                                                                                                                              • Figure 37: Financial analysis of Alternative Bridging Corporation Limited, 2011-15, (£ 000
                                                                                                                            • Company strategy
                                                                                                                            • Amicus Finance (formerly Capital Bridging Finance)

                                                                                                                                  • Figure 38: Financial analysis of Amicus (formerly Capital Bridging Finance), 2011-15, (£ 000
                                                                                                                                • Company strategy
                                                                                                                                • Boost Capital (formerly Business Financial Services (UK))

                                                                                                                                      • Figure 39: Financial analysis of Boost Capital (formerly Business Financial Services (UK)), 2012-14, (£ 000
                                                                                                                                    • Company strategy
                                                                                                                                    • Commercial Acceptances

                                                                                                                                          • Figure 40: Financial analysis of Commercial Acceptances, 2011-15, (£ 000)
                                                                                                                                        • Company strategy
                                                                                                                                        • Dragonfly Property Finance

                                                                                                                                              • Figure 41: Financial analysis of Bridgeco Ltd, 2010-14, (£ 000)
                                                                                                                                              • Figure 42: Financial analysis of Fern Trading Ltd, 2011-15, (£ 000)
                                                                                                                                              • Figure 43: Financial analysis of Rednel, 2013-15, (£ 000)
                                                                                                                                            • Company strategy
                                                                                                                                            • Fortwell Capital (formerly Omni Capital Partners)

                                                                                                                                                  • Figure 44: Financial analysis of Fortwell Capital, 2011-15, (£ 000)
                                                                                                                                                • Company strategy
                                                                                                                                                • Goldentree Financial Services

                                                                                                                                                      • Figure 45: Financial analysis of Goldentree Financial Services, 2011-15, (£ 000)
                                                                                                                                                    • Company strategy
                                                                                                                                                    • Hope Capital

                                                                                                                                                        • Company strategy
                                                                                                                                                        • MT Finance

                                                                                                                                                            • Company strategy
                                                                                                                                                            • Oblix Capital

                                                                                                                                                                • Company strategy
                                                                                                                                                                • Shawbrook Bank

                                                                                                                                                                      • Figure 46: Financial analysis of Shawbrook, 2011-15, (£ million
                                                                                                                                                                    • Company strategy
                                                                                                                                                                    • Together (formerly Lancashire Mortgage Corporation)

                                                                                                                                                                          • Figure 47: Financial analysis of Lancashire Mortgage Corporation , 2011-15, (£ 000)
                                                                                                                                                                        • Company strategy
                                                                                                                                                                        • United Trust Bank

                                                                                                                                                                              • Figure 48: Financial analysis of United Trust Bank, 2011-15, (£ 000)
                                                                                                                                                                            • Company strategy
                                                                                                                                                                            • West One Loans

                                                                                                                                                                                  • Figure 49: Financial analysis of West One Loan, 2011-15, (£ 000)
                                                                                                                                                                                • Company strategy
                                                                                                                                                                                  • Figure 50: Profiled companies’ combined turnover, 2011-15, (£ million)
                                                                                                                                                                              • Forecast

                                                                                                                                                                                • Key points
                                                                                                                                                                                    • Figure 51: Forecast UK bridging loans market value, in aggregated loan balances, 2017-21, (£ billion and % annual change)
                                                                                                                                                                                    • Figure 52: Forecast UK bridging loans market value, in aggregated loan balances, 2017-21, (£ billion)
                                                                                                                                                                                  • Relaxation of permitted development and second charge loans expected to drive growth
                                                                                                                                                                                    • Figure 53: Forecast UK bridging loans market value segmentation, in aggregated loan balances, by sector, 2017-21, (£ billion)
                                                                                                                                                                                    • Figure 54: Forecast UK bridging loans market value segmentation, in aggregated loan balances, by sector, 2017-21, (£ billion)
                                                                                                                                                                                  • FinTech helping modernise industry output
                                                                                                                                                                                    • Lenders aiming to increase market perception by improving transparency
                                                                                                                                                                                      • SME funding gap still offering key development opportunity
                                                                                                                                                                                      • Further Sources and Contacts

                                                                                                                                                                                        • Trade associations
                                                                                                                                                                                          • Association of Bridging Professionals
                                                                                                                                                                                            • Association of Short Term Lenders
                                                                                                                                                                                              • National Association of Commercial Finance Brokers
                                                                                                                                                                                                • Trade magazines
                                                                                                                                                                                                  • Bridging & Commercial
                                                                                                                                                                                                    • Business Matters
                                                                                                                                                                                                      • Commercial Reporter
                                                                                                                                                                                                        • Loans Insider
                                                                                                                                                                                                          • Mortgage Finance Gazette
                                                                                                                                                                                                            • Mortgage Introducer
                                                                                                                                                                                                              • Mortgage Strategy
                                                                                                                                                                                                                • Trade exhibitions
                                                                                                                                                                                                                  • ASTL Annual Bridging Conference 2016 - Lending in an Uncertain World
                                                                                                                                                                                                                    • Financial Services Expo London 2016
                                                                                                                                                                                                                      • National Broker Conference 2016
                                                                                                                                                                                                                        • The Financial Professional Show

                                                                                                                                                                                                                        Companies Covered

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

                                                                                                                                                                                                                        Bridging Loans - UK - July 2016

                                                                                                                                                                                                                        £995.00 (Excl.Tax)