News Review


buy-to-let boost a good omen for short-term bridging finance market


By yuan Phoon


Rising demand for buy-to-let will help boost the short-term finance market. Figures from the Council


of Mortgage Lenders show buy-to-let gross lending in 2010 was £10.4bn. Alan Cleary, managing


director of Precise Mort- gages, said he expected a normal buy-to-let market to be around £20bn gross mark annually, a volume he believes the market will reach by 2015. He thinks bridging lenders will be a significant channel to lend this money to investors. He said: “Buy-to-let growth


could fuel quite significant growth in the bridging mar- ket over the next few years. There are of course other ar- eas that could come alongside to help the bridging market grow, but we certainly see this as a growth story for this mar- ket for the next five years.”


He added that growth in


the buy-to-let market would spur an increase in the num- ber of projects that would re- quire short-term funding. Though there are no offi-


cial figures available, consen- sus amongst the industry sug- gested the bridging market, including short-term buy-to- let, commercial and residen- tial bridging and short-term loans, is around £750m gross annually. Mark Posniac, head of


marketing and operations at Dragonfly Finance, also agreed that the strength of the buy-to-let market was a good omen for the short-term lending sector however he was reluctant to pinpoint how large the sector was. He said: “It’s hard to put a


finger on the size of the short- term market at the moment as there are no official figures available. Industry commen- tators will be taking a punt with their estimates so they


“The bridging market, including short-term buy-to-let, commercial and residential bridging and short-term loans, is around £750m gross annually”


should always be taken with a pinch of salt. “However I do certainly


agree that the growth in strength of the buy-to-let market will spur on growth in the short-term market as it seems that currently, a lot of short-term lenders are focus- ing their lending on invest- ment properties.” And he added: “A strong


buy-to-let market will mean that they will have greater confidence that their loans will be repaid on time with- out the concern that the secu- rity has to be sold in order for their loan to be repaid.” Melanie Bien, director


of London based brokers Private Finance, said that the buy-to-let sector has con-


tinued to go from “strength- to-strength” and that there seems no reason why this situation would change any- time soon. She said: “Bridging has be-


come an important part of the mortgage market as tra- ditional longer-term funding has become scarcer. “Bridging lenders are filling


a gap in the market and with pricing falling as more choice becomes available, short- term funding is becoming a realistic alternative to those struggling to borrow from more traditional sources. “Bridging lends itself well


to landlords who may want to buy a property but are unable to get funding from mainstream lenders because the property is not considered habitable. Once the work has been completed, the investor can either sell the property or remortgage using a tradition- al buy-to-let loan and rent it out.”


Merlin banks not hitting SMe lending targets By yuan Phoon


Bank targets for lending to businesses are not being hit. Banks fell £2.2bn short of


hitting their lending targets to small businesses, the Bank of England’s first quarterly lend- ing report showed. The Chancellor of the


Exchequer, George Osborne, published details of Project Merlin - an accord struck be- tween banks which included


4


targets for corporate lending. One of the targets was a commitment to lend £76bn to small and medium busi- nesses during 2011. The Merlin banks said that


while in line with expecta- tions, SME lending demand reflects the relatively slow growth in demand for goods and services in the economy as a whole at present. A spokesman for the Merlin banks, said: “Demand in some


bridging introducer July 2011


sectors, particularly among SMEs, remains muted, but we are devoting considerable time, effort and resource, par- ticularly through the Better Business Finance initiatives, to ensure that we help viable businesses to access finance. “Nonetheless, economic


conditions remain challeng- ing, and demand for lending is likely to vary through the year. So whilst these num- bers are encouraging, it is too


early to draw conclusions as to the year-end outcome.”


Osborne: set targets to lend £76bn


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