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nigel woollsey

Nigel Woollsey

Online Writer
Published: 11/11/2019

When it comes to business savings accounts the market is still offering inflation-beating interest rates for those organisations that are happy to lock their funds away for at least 24 months. In addition to this, a few providers are offering rates that look set to stay ahead of inflation until 2022.

According to the latest data from Moneyfacts.co.uk, the average monthly interest rates for bridging loans have reduced from just under 8% since the start of the year and now. Rates have dropped from 0.798% per month to 0.736%. During the past 11 months, only one bridging lender has increased its rates, while there have been eight rate reductions. The analysis included between 40 and 46 providers during the year.

There has been an increase in SMEs looking to borrow money to finance growth in the first half of 2019, according to a report by the BVA BDRC SME Finance Monitor.

In the report it is revealed that nearly half (46%) of SMEs were using external finance in the first half of 2019, up from 36% in 2018, with an increase in small businesses using overdrafts, increasing from 19% in 2018 to 23% in the first half of 2019, and credit cards, increasing from 14% to 19%. This has led to the proportion of businesses using finance (46%) now exceeding the proportion that are not (41%), which is the first time this has happened since 2014.

Shiona Davies, director at BVA BDRC, said: “Use of finance has increased, yet appetite for finance and new application remains limited. Most applications are made to the main bank for loans or overdrafts, and most of those who apply are successful, but there are signs of more SMEs considering self-funding alongside, or instead of, an application for finance. Future appetite for finance remains stable, although an increasing minority of SMEs are looking to reduce their use of external finance.”

Currently, bridging loans unlike residential and buy-to-let mortgages do not need to show an APRC for their products.  The use of a single metric to compare the cost of credit between products has been in place for 45 years. APRs (annual percentage rates) were introduced in the Consumer Credit Act 1974. In March 2016 these were updated for mortgages and buy-to-let to APRCs (annual percentage rate of charges) as part of the Mortgage Credit Directive.

Moneyfacts.co.uk wanted to find out the views from bridging lenders about whether APRCs would help or hinder borrowers and brokers in comparing bridging loans. We approached over 40 bridging lenders and of those that responded, half decided not to declare a view, and the other half were evenly divided between being in favour or having concerns about the appropriateness of APRCs for bridging loans.  

All the lenders who gave a comment agreed that transparency is critical in making sure brokers and borrowers can find a bridging loan that meets their needs. There is then a debate about the most appropriate way to do this from those who are strong advocates of the APRC, such as Funding 365 with others who take a more cautious approach about its applicability to the bridging market.

Hope Capital has recently launched a new bridging loan called ‘Hope Seven 5’. The new product is available on a first charge basis up to 75% loan-to-value (LTV) for residential properties up to £750,000. Borrowers can only use this bridging loan for non-regulated sales, for example to buy residential properties as an investment. This new bridging loan can only be used for properties in England and Wales at a rate of 0.75% for no longer than a 12-month term.

The new offer will only be available for as long as the tranche of funds set aside for this product lasts.

Gary Bailey, managing director said: “We have seen a growing demand for good value bridging loans for residential property, so we have launched this new bridging loan to meet this demand. We predict that it will be particularly useful for breaking a chain when buying a property as this is one of the biggest reasons for purchases falling through.”

 

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