Bridging Industry Rejoices Over Latest Figures
In these tough and volatile economic times, most people are aware that both secured and unsecured loans are on the rise, mainly as people look to make up for any drops in income through borrowing money. What is less known though is the rise in the amount of bridging loans that are also being issued, with a number of specialist companies now having to employ extra staff to cope with the demand being placed on them by members of the public eager to use their services.
It has been estimated by one company
West One Loans – that the UK bridging lenders will be issuing loans to the tune of A1 billion by the middle of 2013. In 2010 the bridging marker was worth approximately A700 million, but rapid expansion has seen an A50 million increase in this valuation just in the first quarter of 2011. What are the reasons for the large increase in demand to bridge loans and do each industry sector share the same optimism?
Well, the main increase for this increase is due to housing shortages which currently grip the country. People are reluctant to sell their homes for the current valuation – which is very low – and therefore there is more competition for each home that enters the market. To win an offer, a potential buyer must be able to make a good offer, which can often only be achieved with the help of a bridging loan. This is further made clear by the fact that many homes are bought by those who can afford to buy at current prices easily, such as property investors and those who want to buy. This means that competition for homes is increasing.
Another reason for the increase in bridging loans is the fact that there is a general credit crunch. In these tough economic times, lenders need to be extra cautious about the people that they lend to, as there is a greater risk of non-payment. This has caused a number of people to turn to loan companies to supply them with a bridging loan so that they can quickly get together the money needed for a deposit on the home that they want to buy. Although this means often paying higher interest rates than mortgages, it is the only choice that many people have.
Optimism regarding the state of the bridging market is generally shared as a whole, but the figures quoted at the beginning of this article are seen by many as the best-case scenario. AOPB has stated that the bridging market will grow, but they estimate that the industry is currently worth A306 million – more than half the figure quoted earlier. More excavation needs to be done by those responsible for regulating the industry to determine the current actual value and also the predicted value of the bridge sector.
However it was seen, the bridge industry was in very good condition. So often it has been the most ignored area of lending, but now it seems to be really coming to the fore. It only remains to be seen whether its popularity will remain once the financial crisis has finally passed.