Weak mortgage lending will increase reliance on alternative forms of finance in 2013

January 7, 2013

Growth in the mainstream mortgage market in 2013 will be eclipsed by the expansion in lending from alternative sources, according to the results from our latest Broker Survey.

The survey, conducted through November 2012, was aimed at determining what brokers expected for the short term loan sector in 2013.

The headline results were hugely optimistic with brokers forecasting the bridging industry will grow by 36% over the next year – four times faster than the mainstream mortgage market, meaning alternative finance is expected to provide more new funding than the state Funding for Lending Scheme. There was also positive news for borrowers and buy-to-let landlords as 45% of brokers expect average short term loan rates to be lower in a year’s time as the market becomes more competitive.

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.

Duncan Kreeger comments: “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. That’s driving potential borrowers of various kinds to alternative sources of finance like bridging. Fortunately, the bridging market has proved very dynamic over the last few years and has been able to respond to that demand.

“By the end of 2013, the bridging industry will be lending almost 400% more finance than it was in 2010. In contrast, the high street will be lending just 11% more than it was in 2010.”