The combination of recent tax and regulatory changes has impacted the decisions and the level of flexibility of high street lenders, in turn, helping to establish bridging finance as a suitable financing option in numerous circumstances. The desire for quick turnarounds and availability has given a boost to alternative finance providers. This is a favourable market observation, given the 19.1% increase in homeowner remortgages, as well as the increase in the number of first-time buyers and home movers, compared to the same period in 2017.
Short-term lending market
The Association of Short Term Lenders (ASTL) is confident about the future of the bridging finance industry and its ability to support the property development sector in the UK, having lent £386.1million worth of development loans in the first quarter of 2018, £242.2million of which were categorised as bridging.
Benson Hersch, CEO of the ASTL, has commented: “Whilst SME building firms continue to be locked out of mainstream channels, they will increasingly rely on different sources of finance such as short-term funding solutions. These alternative forms of finance are providing a solution and allowing small developers to play their part in housing delivery.”
Independent business finance providers
There has been an observed increase in the level of activity among independent business finance providers, with SME funders reporting positive figures. Such players are seen as alternatives to high street finance providers. For example, Henry Howard, one of such SME lenders, has been a reported 50% year-on-year increase in own book lending, after having funded more than 4,000 businesses during the first half of 2018. Another boutique lender, Bridge Invest, claims to have provided over £8million in funding in Q2 2018 across several major cities including London, Birmingham, Manchester and Leicester.
Most of the growth in real estate lending has been through alternative online lending platforms, which are largely built on the peer-to-peer (P2P) model. This lending sector has increased the frequency and the size of loans and mortgages available to financial intermediaries and commercial finance brokers. Recent reports suggest that Lendy, a P2P secured lending platform, has broken the £400million barrier in financing the UK property market.
Most P2P platforms focus on bridge funding, usually to a developer or buy-to-let landlord with a portfolio of properties, however, some alternative online lending platforms also offer direct buy-to-let mortgage and commercial real estate loan options. Meanwhile, six members of the P2P Finance Associations have reported over 28,000 Innovative Finance ISAs (IFIsas) opened, with more than £300m of funds already under management, after making them widely available to customers over last fifteen months.
This article was written by Matthew Dailly, Managing Director of specialist bridging loan and development finance broker – Tiger Financial Ltd.
About Tiger Financial:
Tiger Financial is whole of market bridging and development finance broker with over a decade in the market. Their team works to provide short term property funding solutions across the whole of the UK, offering bespoke and flexible lending terms. Using their well-established network of trusted lenders, complemented by an exclusive stable of high net worth individuals and family offices, they strive to get your project funded, even when most lenders say no.