Sharp rise in sentiment among bridging lenders post-Brexit

While buy-to-let lenders brace themselves for further interventions, confidence in one often-overlooked corner of the market is currently booming.

Sentiment among bridging lenders has bounced back “considerably” since the UK’s vote to leave the EU three months ago, according to the Association of Short Term Lenders (ASTL).

ASTL’s latest member survey revealed that 30% were positive about the long term future for the UK economy, up from just 6% in the immediate aftermath of the EU referendum.

ASTL’s chief executive Benson Hersch said: “Optimists will take heart from these results as there has been a definite positive swing in the feelings of bridging lenders, reflected by a jump in the ASTL positivity index.

“Today’s results show more of a sense of normality and highlight the sense of shock that was rippling through the industry in the days immediately following the referendum result.”

Demand from property investors for bridging loans – short-term secured loans designed to bridge a temporary cash shortfall when acquiring a property – has surged in recent years.

Bridging loans were once perceived as a ‘last resort’ lending option. But with a growing number of borrowers attracted to the greater flexibility offered by alternative finance providers, including no minimum term and no exit fees, it is now expanding significantly faster than the mainstream mortgage market, which grew by 8% in the whole of last year, according to the Council of Mortgage Lenders.

ASTL bridging figures for the second quarter of the year – the pre-Brexit months to the end of June – showed bridging completions up 19% on Q2 2015, while loan applications increased 61%, and loans written in the year hit £2.85bn, up 17%.

But findings from ASTL’s latest survey found that bridging lending could weaken in the coming months, with about 45% of respondents saying that the bridging market would grow over the next six months, while 55% thought it would shrink or remain the same.

Looking at the broader market, very few short term lenders thought the housing market would remain so resilient to the Brexit vote, with 43% of respondents now anticipating a fall in home values over the next six months, down from 68% in June.

“It is clear that despite a bounce, many respondents are still sitting on the fence, uncertain as to which way the wind may yet blow,” Hersch added.