Bridging Loans - UK - July 2016

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