Bridging loans ‘to increasingly fill funding gap’

GROWTH in the mainstream mortgage market in 2013 will be eclipsed by the expansion in lending from alternative sources, according to a poll of financial intermediaries.

GROWTH in the mainstream mortgage market in 2013 will be eclipsed by the expansion in lending from alternative sources, according to a poll of financial intermediaries.

Mortgage intermediaries forecast the industry for bridging loans – a form of short-term, often expensive lending – will grow by 36 per cent, four times faster than traditional lending, according to the survey of 400 mortgage brokers carried out by peer-to-peer bridging lender West One Loans. It predicts this will equate to extra lending of £511 million by the third quarter of 2013.

In December, the Council of Mortgage Lenders (CML) predicted that banks and building societies would lend an extra £12 billion in 2013, just 8.3 per cent more than in 2012.

The poll also found that just under half, or 45 per cent, of brokers expect interest rates on bridging loans to fall this year.

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Duncan Kreeger, chairman of West One Loans, said: “The mainstream market is going nowhere fast. Even the 8 per cent forecast from the CML seems hugely optimistic. The banks are being hobbled by funding constraints – capital adequacy rules mean that they’re in no position to lend a great deal more money.

“The market is desperate for extra funds – small businesses, in particular, are crying out for loans – the most carefully considered investment plans are being ignored by banks on the high street. That’s driving potential borrowers of various kinds to alternative sources of finance like bridging.”

ERIKKA ASKELAND