Alternative finance to flourish in 2013

Alternative finance to flourish in 2013

A survey of 400 mortgage brokers carried out by peer-to-peer bridging lender West One Loans, forecasts the bridging industry will grow by 36% over the next year.

The data showed that gross mortgage lending will grow just 8.3% in 2013.

Whilst the Funding for Lending Scheme is thought to have a sizeable impact of ï¿¡496m, lending from private sector bridging lenders is likely to exceed that at £511m.

In December the Council of Mortgage Lenders predicted that banks and building societies would lend an extra ï¿¡12 billion in 2013, 8.3% more than they did in 2012.

Duncan Kreeger, chairman, West One Loans said: “The mainstream market is going nowhere fast. Even the eight percent 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.

“At the same time, 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.”

Mr Kreeger said this was meaning borrowers looked to alternative finance sources for lending.

He said the dynamic nature of the bridging market meant that it had responded well to increased demand.

British banks have taken out ï¿¡4.4bn from the Bank of England through the Funding for Lending Scheme, but that has helped them increase lending by only ï¿¡496m.

Mr Kreeger said: “The Bank of England wants to improve funding, and that’s very commendable. It makes sense when the Bank’s very own Director of Financial Stability says the debt crisis has done the same economic damage as a world war.

“But FLS has unquestionably been a massive disappointment. The approach of the unfettered private sector has proved far more powerful.”

Bridging loans for borrowers with lower deposits are expected to become more widely available — as an increasing proportion of intermediaries expect loan to value ratios to increase.

The proportion of bridging brokers expecting higher LTVs in twelve months’ time now stands at 35%, compared to 14% who expect lower LTVs in 2013.

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