Bank lending to property developers has halved over the last two years, making it more difficult for companies to kick-start schemes that could help ease the housing crisis, a new report out today claims.
Bank finance has dropped from £34bn in January 2014 to just £16bn the same month this year – with bridging finance or auction finance particularly hard to come by – according to Funding Options, the online business finance supermarket.
These are usually short term loans used to take ownership of a property before obtaining a traditional term loan or mortgage. However, without access to this type of finance developers cannot take projects beyond the planning stage.
Funding Options said banks are happy to offer long term mortgages and term loans secured on property but see the short-term loans as too risky. As a result alternative lenders, who can make quicker decisions and have different lending criteria to banks, are stepping into the lending gap.
Conrad Ford, chief executive of Funding Options, said: “Property developers need finance to start projects and most traditional banks are unable or unwilling to provide it.”
“The UK desperately needs more new homes as many younger potential homebuyers are being effectively priced out of the housing market. Better access to finance alone will not solve the housing crisis but it is a vital component of the solution.”