Can we expect growing market for alternative mortgage lending in the New Year?

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simoncraig on 23:03, Jan 3, 2013
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Can we expect growing market for alternative mortgage lending in the New Year?

The Council of Mortgage Lenders expected that the banks and other financial institutions may lend 8.3% more in 2013.   

According to the recent prediction of the mortgage intermediaries, the bridging industry may grow by 36% by the middle of this year. The bridging industry may grow four times faster than the mainstream mortgage market.

The West One Broker Sentiment Survey states that there has been an annual growth of 65% in the end of the third quarter of 2012. 

However, the mainstream market is not growing fast. The bank and other financial institutions are not in a state to lend more due to limitation of funds and capital adequacy rules. 

The market is looking for extra funds and even the well conceived investment plans of the small business are completely ignored by the banks. Therefore, the borrowers are looking for various types of alternative sources of finance, for instance bridging loan.

Since last few years, the bridging market has been extremely dynamic and responded to the demand of the borrowers. From 2010 till now, we can see the bridging industry to lend 400% more finance. From 2010, the lending of the high street has increased by 11% only. The Government’s Funding for Lending Scheme (FLS) is overshadowed by the emerging alternative funding market. The British banks have obtained £4.4 billion from the Bank of England through the Funding for Lending Scheme and it helped them to increase lending by only £496 million. 

However, the Bank of England is inclined to improve the funding. The director of Financial Stability told that the effect of debt crisis is quite visible on the present economic scenario. But FLS is a complete disaster as the private financial lenders have proved to be really successful in the lending sector.

The lending in the bridging sector has increased by 65% by the end of the third quarter of 2012. The growth increased by £670 million and it is considered to be more extra lending than government institution.    

According to the survey of the West One Loans, a large number of the brokers expect low interest rate on the bridging loan. Most of the brokers are anticipating that the average interest rate may be low within a year’s span.

Over the next few months, a steep competition is expected in the market as the bridging industry becomes more professional. Well, it’s a boon for the borrowers as they can expect more competitive rates due to the maturing market.