Second charge bridging lending at record high
Short-term second charge lending is at a record high, according to the first analysis of the second charge bridging industry from West One Loans.
Annual lending of £778m brings short-term second charge loans to a record high in 2013. An additional £229m in gross lending in the twelve month period represents growth of 42% in annual short-term secured lending since the start of 2013, when this stood at £549m.
Over the last two years, short-term second charge lending has increased by 124%, more than doubling gross lending of £357m in the twelve months ending January 2012.
Duncan Kreeger, director at West One Loans, commented: “Consumer confidence is driving a surge in secured loans for consumables, which is good news for the wider economy and stimulates our collective spending power.
“But by contrast, short-term secured loans tend to be focused on capital investment. Businesses are expanding, and want to capitalize on opportunities with fast and flexible finance.
“Property investors and developers have formed a growing portion of the frenzy for new loans in recent months – Britain’s property market is a prime example of this escalating demand for short-term finance.”
Trends in short-term lending: 1st and 2nd charge
Over the last two years volumes of second charge short-term loans have outpaced traditional first charge bridging loans.
Second charge loan volumes have increased by 57% since January 2012 compared to 51% growth in lending volumes for 1st charge loans.
However, 2013 saw faster volume growth in the first charge market. Second charge short-term loans increased in number by 14% between January 2013 and January 2014. This compares to stronger growth in first charge loan volumes, up 67% over the last twelve months.
Second charge short-term loans are considerably smaller on average than first charge short-term loans.
The average short-term second charge loan has increased in value to reach £260,000, up 31% compared to an average of £199,000 in the twelve months to January 2013.
By contrast, the average traditional short-term bridging loan (acting as the primary charge against a property) was for £457,000 – or 76% more than the second charge equivalent.
Interest rates
Short-term interest rates have fallen to a record low for second charge loans.
In line with increasingly competitive rates across the short-term lending markets, the average monthly interest rate on a short-term second charge loan now stands at 1.26%, down from 1.49% in January 2013.
Mark Abrahams, CEO of West One Loans, concluded: “As we shed the gloom that has hung over the UK for far too many years, opportunities to invest are becoming more competitive.
“In many areas this is starting to inch up the cost of capital. But a new appetite for the most immediate and lucrative projects is still opening up new markets and partnerships for UK lenders.
“Meanwhile investors are hungry for new opportunities. They want to be involved in tangible projects that add serious value. The best lenders are making those connections with credit-worthy opportunities in business and property in the UK.”
