Bridging Trends

Average bridging completion time now north of 50 days

In Q3, the average completion time of a bridging loan climbed to 52 days, which could be attributed to "operational capacity issues" according to the latest Bridging Trends data.

This is up from 50 days in Q2, and a rise on Q3 2019 and 2018, which registered an average of 51 and 46 days, respectively.

Figures showed a 46% increase in bridging loan volume in the third quarter of the year, as Covid-19 lockdown restrictions eased.

Contributor lending transactions totalled £115.52m in the period.

Although lending figures were 36% below the pre Covid-19 levels of £180.94m, they had risen significantly from the £79.4m of bridging loans transacted in the previous quarter.

The average weighted monthly interest rate in Q3 decreased to 0.78%, from 0.85% in Q2, falling back in line with rates offered before the Covid-19 outbreak (0.75%).

Average LTV levels in the third quarter increased to 51.7%, from 48.8% in Q2. 

Bridging Trends explained this is likely due to borrowers turning to bridging finance, as mainstream lenders continue to tighten their maximum LTV restrictions.

For the eighth consecutive quarter, the average term of a bridging loan remained at 12 months.

Regulated bridging lending continued to dominate the sector in Q3 at an average of 53% of all lending, compared to 47% of unregulated transactions.

For the seventh consecutive quarter, the most popular use of a bridging loan was to purchase investment property.

Both regulated refinance and a traditional chain break were the second most popular uses for bridging finance, contributing to 17% of all lending in Q3. 

Demand for regulated refinance increased by 8%, and chain break by 7%.

On the other end, demand for second-charge lending dropped significantly, from 26.1% in Q2 to 17.7% of total market volume.

22% of all lending transacted by the report’s contributors in Q3 was for investment purchase purposes, dropping slightly from 25% during Q2 2020. 

Gareth Lewis, commercial director at MT Finance, said: “The stamp duty holiday and rising house prices has ensured that the market remains busy, and it has been well publicised that the mortgage market is currently feeling the strain when it comes to delivering acceptable processing turnaround times, which can add to an already stressful experience. 

“Given the stress on a chain, presented by the slow processing times, it is unsurprising to see more clients turning to regulated bridging finance to support their purchases.”

Chris Whitney, head of specialist lending at Enness, commented: “Rates are down a bit, but I think we will see that drop much further in the next index, as price wars seem to dominate the market right now."

He added that LTVs were “still surprisingly modest”, which suggested “responsible” lending still dictated in most of the market.

“From July onwards we saw some lenders who had been in a pandemic hibernation return, so there was more choice of funding and others had started to go back to pre Covid-19 LTVs, making certain transactions viable again.

“In the last quarter, lenders and key stakeholders such as valuers and solicitors had also been able to refine systems and processes that had initially caused problems when lockdown hit in terms of handling volume.”

Chris continued by saying he did not think the increase was purely a supply-led cause, as the industry had seen “huge demand” from borrowers as well.

“It just goes to show how robust the industry is and how important it is to the economy.”

According to Chris, demand will continue to increase, as many high street lenders are closed to new businesses or are being very restrictive as to what sectors they will lend into, and on what terms.

Craig Hardiman-Scott, senior associate at Sirius Property Finance, commented: “Customer demand is extremely high, so it comes as no surprise that the short-term loan market continues to be very buoyant from developer exits through to business capital injections, to name but a few.

“Those with competitive rates, products, and service that have been able to adapt their offerings throughout the pandemic are well placed to continue seeing the benefits.”

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