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Bridging Loans - UK - July 2017

EXECUTIVE SUMMARY
Market size
New regulation and recent business uncertainty has dampened growth, but industry remains positive
Figure 1: UK Bridging Loans Market Value, in Aggregated Loan Balances, 2013-2017, (£ Billion)
Commercial loans top development sector for first time in three years
Figure 2: UK Bridging Loans Market Value Segmentation, in Aggregated Loan Balances, by Sector, 2013-2017, (£ Billion)
Mortgage delays continue to represent most common use of bridging loan
Figure 3: UK Bridging Loans Market Value Segmentation, by Loan Purpose, 2017, (% of Bridging Loans)
Market trends
Rising levels of regulatory measures leading drive in the number of regulated bridging loans
Bridging interest rates continue to fall with no sign of slowdown in competition
Slow flow of SME finance continues to provide lending opportunity
Rate of market expansion not reflected in similar rise in share of total mortgage lending
Market factors
‘Brexit’ uncertainty will affect lending environment...
... and has led to strategic changes following a squeeze on funding lines
Industry Structure
Forecast
Aggregated loan balances forecast to rise by 49% to 2022
Figure 4: Forecast UK Bridging Loans Market Value, in Aggregated Loan Balances, 2018-2022, (£ Billion)
Strong, persistent investor interest in commercial sector will drive growth
Figure 5: Forecast UK Bridging Loans Market Value Segmentation, in Aggregated Loan Balances, by Sector, 2018-2022, (£ Billion)
What we think
KEY INSIGHTS
How has the industry been affected following the start of Brexit negotiations and the uncertainty caused by the recent general election?
How has the industry changed following the implementation of new regulatory measures?
After recording significant growth over the last decade, have other lenders attempted to disrupt this growth by offering rival products?
Can widening the use of technology further shorten the bridging loan process and improve efficiency?
INTRODUCTION
Definitions
Methodology
Abbreviations
MARKET POSITIONING
Associations have helped promote the industry in the alternative finance market
UK ECONOMY
Key points
Overview
Figure 6: UK GDP, 2007-2017, (% Quarterly Growth and GDP in £ Billion)
Figure 7: UK Output, by Industry, 2008-2017, (Index 2013 = 100)
Figure 8: Quarters after GDP Peak, 1979, 1990 and 2008, (Number of Quarters and GDP as % of PreDownturn Peak)
Inflation
Interest rates
House prices
Figure 9: UK House Price changes, 2006-2017, (12-month % change)
Consumer spending
Manufacturing
Figure 10: UK Manufacturing, 2014-17, (Index, 2013 = 100)
Business investment
Figure 11: UK GFCF 2006-2017, (£ Million)
Imports
Exports
MARKET FACTORS
Key points
Brexit uncertainty will affect lending environment...
... and has led to strategic changes following a squeeze on funding lines
Access to finance remains a barrier to bridging loan use
Annual GDP growth rises in 2016, but challenging times emerge
Figure 12: GDP growth rate, Q1 2013-Q1 2017, (% change on previous quarter)
Figure 13: GDP Growth Rate, Q1 2013 - Q1 2017, (% change on previous quarter)
Property market still providing lending opportunities despite growing uncertainty
Figure 14: Number of Residential Property Transactions, 2012-16, (Number, Seasonally Adjusted)
Figure 15: Number of Residential Property Transactions, 2012-2016, (Number, Seasonally Adjusted)
Figure 16: Number of Non-Residential Property Transactions, 2012-16, (Number, Seasonally Adjusted)
Figure 17: Number of Non-Residential Property Transactions, 2012-2016, (Number, Seasonally Adjusted)
Figure 18: Company Insolvencies in England and Wales, 2012-16, (Number)
Figure 19: Company Insolvencies in England and Wales, 2012-2016, (Number)
Legislation and regulation
The EU Mortgage Credit Directive
Buy-to-let mortgages
The Small Business, Enterprise and Employment Act
Stamp duty changes
FCA clampdown on unregulated activity
MARKET SIZE
Key points
New regulation and recent business uncertainty has dampened growth, but industry remains positive
Figure 20: UK Bridging Loans Market Value, in Aggregated Loan Balances, 2013-2017, (£ Billion and % Annual Change)
Figure 21: UK Bridging Loans Market Value, in Aggregated Loan Balances, 2013-2017, (£ Billion)
MARKET SEGMENTATION
Key points
Figure 22: UK Bridging Loans Market Value Segmentation, in Aggregated Loan Balances, by Sector, 2013-2017, (£ Billion)
Figure 23: UK Bridging Loans Market Value Segmentation, in Aggregated Loan Balances, by Sector, 2013-2017, (£ Billion)
Loan purpose
Figure 24: UK Bridging Loans Market Value Segmentation, by Loan Purpose and in Aggregated Loan Balances, 2016 and 2017, (% of Bridging Loans and Value in £ Billion)
Figure 25: UK Bridging Loans Market Value Segmentation, by Loan Purpose, 2017, (% of Bridging Loans)
MARKET TRENDS
Key points
Rising levels of regulatory measures driving the number of regulated bridging loans
Borrowers now use bridging for a variety of reasons
Bridging interest rates continue to fall with no sign of slowdown in competition
Figure 26: AOBP Bridging Market Trend Report, Average Interest Rate, September 2013 - March 2016, (%)
Figure 27: AOBP Bridging Market Trend Report, Average Interest Rate, September 2013 - March 2016, (%)
Emergence of ‘re-bridging’ has caused alarm
Slow flow of SME finance continues to provide lending opportunity
Commercial property offering bridgers a route to growth while residential sector stagnates
Figure 28: Halifax and Nationwide House Price Index, by Annual Change per Quarter, Q1 2009 - Q2 2017, (%)
Figure 29: Halifax and Nationwide House Price Indices, by Annual Change per Quarter, Q1 2009 - Q2 2017, (%)
Other industry trends
LTVs tend to fall in latter stages of a year
Figure 30: AOBP Bridging Market Trend Report, by Sector, Average Loan-to-Value, September 2013 - March 2016, (%)
Figure 31: AOBP Bridging Market Trend Report, Average Loan-to-Value, September 2013 - March 2016, (%)
Rate of market expansion has not led to similar rise in share of total mortgage lending
Figure 32: ASTL Gross Mortgage Lending Estimates, 2013-2017, (£ Million and %)
Figure 33: ASTL Gross Mortgage Lending Estimates, 2013-2017, (£ Million and %)
INDUSTRY STRUCTURE
Key points
Industry development
Lenders conducting more regulated lending, but unregulated still dominates despite FCA concern
ASTL membership doubles in five years as drive towards responsible and transparent lending continues
More lenders extend offerings to Scotland to exploit gap in the market
Aldermore exit serves as warning to new entrants seeking high returns
Lender overview
Figure 34: Bridging Lenders’ Activity and Product Detail, by Lender, 2017
COMPANY PROFILES
ALTERNATIVE BRIDGING CORPORATION
Figure 35: Financial Analysis of Alternative Bridging Corporation Limited, 2012-2016, (£ 000)
Company strategy
AMICUS FINANCE (FORMERLY CAPITAL BRIDGING FINANCE)
Figure 36: Financial Analysis of Amicus (formerly Capital Bridging Finance), 2012-2016, (£ 000)
Company strategy
BOOST CAPITAL (FORMERLY BUSINESS FINANCIAL SERVICES (UK))
Figure 37: Financial Analysis of Boost Capital (formerly Business Financial Services (UK)), 2012-2015, (£ 000)
Company strategy
COMMERCIAL ACCEPTANCES
Figure 38: Financial Analysis of Commercial Acceptances, 2012-2016, (£ 000)
Company strategy
FORTWELL CAPITAL (FORMERLY OMNI CAPITAL PARTNERS)
Figure 39: Financial Analysis of Fortwell Capital, 2012-16, (£ 000)
Company strategy
GOLDENTREE FINANCIAL SERVICES
Figure 40: Financial Analysis of Goldentree Financial Services, 2012-2016, (£ 000)
Company strategy
HOPE CAPITAL
Company strategy
MT FINANCE
Company strategy
OBLIX CAPITAL
Company strategy
OCTOPUS PROPERTY (FORMERLY KNOWN AS DRAGONFLY PROPERTY FINANCE)
Figure 41: Financial Analysis of Bridgeco Ltd, 2011-2015, (£ 000)
Figure 42: Financial Analysis of Fern Trading Ltd, 2012-2016, (£ 000)
Figure 43: Financial Analysis of Rednel, 2013-2016, (£ 000)
Company strategy
SHAWBROOK BANK
Figure 44: Financial Analysis of Shawbrook, 2012-2016, (£ 000)
Company strategy
TOGETHER COMMERCIAL FINANCE LTD (FORMERLY LANCASHIRE MORTGAGE CORPORATION)
Figure 45: Financial Analysis of Together Commercial Lending (formerly Lancashire Mortgage Corporation), 2012-2016, (£ 000)
Company strategy
UNITED TRUST BANK
Figure 46: Financial Analysis of United Trust Bank, 2012-2016, (£ 000)
Company strategy
WEST ONE LOANS
Figure 47: Financial Analysis of West One Loan, 2012-2016, (£ 000)
Company strategy
Figure 48: Profiled Companies’ Combined Turnover, 2012-2016, (£ Million)
FORECAST
Key points
Aggregated loan balances forecast to rise by 49% to 2022
Figure 49: Forecast UK Bridging Loans Market Value, in Aggregated Loan Balances, 2018-2022, (£ Billion and % Annual Change)
Figure 50: Forecast UK Bridging Loans Market Value, in Aggregated Loan Balances, 2018-2022, (£ Billion)
Strong, persistent investor interest in commercial sector will drive growth
Figure 51: Forecast UK Bridging Loans Market Value Segmentation, in Aggregated Loan Balances, by Sector, 2018-2022, (£ Billion)
Figure 52: Forecast UK Bridging Loans Market Value Segmentation, in Aggregated Loan Balances, by Sector, 2018-2022, (£ Billion)
Reduction in buy-to-let activity could dampen growth
Bridgers offered help to overcome possible funding line struggles
FURTHER SOURCES AND CONTACTS
Trade associations
Trade magazines
Trade exhibitions

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