NotNecessarily

 

The latest ASTL members’ figures for applications, completions and total loan book reveal that bridging continues to grow year on year but that the rate of growth is slower than in previous years. This could lead people to think that the bridging market itself is slowing, however all is not what it seems on the surface as the bridging market continues to grow at a significant rate. 

The ASTL bridging figures differ from some lending figures is that ours are not seasonally adjusted.  This means they accurately reflect the usual ups and downs that happen throughout the year.  I know that some market commentators have long called for every producer of housing and lending figures to provide real figures rather than seasonally adjusted ones; as these provide a more realistic picture of exactly what is happening in the market.  In the worst case scenario, if figures are seasonally adjusted and then updated and substantially changed some months down the line; it could mean that we don’t get a true picture of what is happening until much later

By showing unadjusted figures, the ASTL reflects the real ups and downs of the market and true seasonal fluctuations.  So, for example, the value of bridging loans written has dropped 8.8% from the quarter ending December 2015 to the quarter ending March 2016. However, much of that is due to the seasonal slowdown at the beginning of the year.

Typically, for bridging lenders, the last quarter in recent years borders on the frenetic and Q4 is usually the busiest quarter of the year. As a result, it is normal to see lower completion figures in Q1 of the following year. 

To get a true picture you therefore need to look at the longer term.  Annually the figures for bridging lending are up 16% this Q1 compared to the quarter ending March 2015, and 2015 figures in turn were up 49% over Q1 2014 – despite the fact that last March, quarter on quarter the value of loans written dropped by 14.3%, much more than this year.

So what is this actually telling us about the bridging market?  Ultimately, the bridging market is continuing to grow, just at a slower pace than it has done in the past.  .  The appetite for short term loans continues to grow; as is reflected in the fact that applications for bridging loans for the year ended March 2016 are 20% higher than for the year ended March 2015.

Of course, consumer confidence plays a very big part in this.  Q2 each year usually shows an improvement over Q1. This year may not follow the usual trend due to uncertainty caused by the impending EU “remain or out” referendum.  The scare tactics being employed on both sides of the debate may not only influence which way someone decides to vote but may have a destructive effect on the wider economy by damaging consumer confidence.   So, some people feel they cannot make decisions on large financial decisions such as housing until the vote has taken place.   Irrespective of how things may turn out, perception is everything and negative predictions may prove to be self-fulfilling.

A version of this article appeared in the June 2016 edition of Bridging Introducer