lending activity declines

Gross bridging lending activity declines in Q1

Gross bridging lending activity during Q1 fell by 5.5% compared with Q4 2016, according to the latest Bridging Trends data.

Bridging Trends found that gross lending in the first quarter of 2017 reached £118.79m (Q4 2016: £125.66m).

The Q1 result was also 5.23% down on the Q1 2016 gross lending figure (£125.35m).

Bridging Trends also found that regulated bridging loans outperformed unregulated bridging loans for the first time since Bridging Trends was launched in April 2015.

The number of regulated loans transacted by contributors increased from 37.3% in Q4 2016 to 50.7% in Q1 2017.

Mortgage delays were cited as the most popular reason for using bridging finance with refurbishment the second-most common.

Meanwhile, first charge lending for the quarter grew to 86.6%, whereas second charge transactions dropped slightly to 13.4%.

Average LTV levels fell to 46.2%, while the average monthly interest rates increased to 0.83%.

The average completion time on a bridging loan application increased by two days to 50 and the average term hit a new high of 12 months.

Joshua Elash, director of bridging finance at MTF, said the significant shift towards regulated lending had impacted the average time it takes to complete a bridging loan.

“While the level of regulated activity is up, it is interesting to see rates increase for the first time in five reporting cycles.

“While it is too early in the year to draw any firm conclusions from this first quarter of data, it is these key parameters we are most keenly observing as we move forward in the year.”

Michael Perry, bridging finance broker at Enness Private Clients, felt that Q1 2017 appeared to have experienced a hangover from the financial uncertainty of 2016.

“As predicted, it’s no surprise to see the number of regulated loans among specialist lenders increasing in Q1 with various government changes putting pressure on the market to move into the regulated sector.

“We have been aware for a while of several non-regulated lenders looking to become regulated, so this could well be a demonstration of this.”

Kit Thompson, director of short-term lending and development at Brightstar, felt the slight drop in lending was not significant nor a sign of a shrinking market.

“We just had less completions in Q1, which is supported by the increase in the average completion time to 50 days.

“New business enquiries in Q1 were way up and our business pipeline of post-offer cases is larger than ever.

“It is the delays in cases paying out that I attribute to this slight drop on the previous quarter.”

Kit explained that the delays seemed to be twofold: a lack of urgency on the borrower’s part and continued delays with legals.

“This seems to be an industry-wide issue and one we are trying to address by offering a panel of experienced bridging lawyers to borrowers, which we [hope] will reduce the average completion times.

“The stand-out stat for me is that the percentage of FCA-regulated loans out-stripped non-regulated loans for the first time.

“I would attribute this to a combination of the cheapest rates the sector has ever seen (especially in the regulated arena), coupled with an increased awareness of bridging finance as a possible funding solution among brokers and borrowers.

“I predict a much stronger Q2 for completed bridging loans and expect there to be a more even split of reg vs non-reg loans moving forward, coupled with increased demand for refurbishment finance.”

Bridging Trends is a quarterly publication conducted by bridging lender MTF and specialist finance brokers Brightstar Financial, Enness Private Clients, Positive Lending and SPF Short Term Finance designed to monitor the general trends in the bridging finance market.

To view the Bridging Trends Q1 2017 infographic, please visit www.bridgingtrends.com.

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