Regulated bridging slows to lowest level since Q1 2015

By Bridging Loan Directory 31st October 2018

Regulated bridging loans fell in the third quarter to the lowest level since Q1 2015, according to the latest Bridging Trends data.

The number of regulated loans conducted by Bridging Trends contributors fell for the second consecutive quarter, to 31.6% of all lending in Q3 2018, compared to 36.8% during Q2 2018.

This is the lowest level since Q1 2015, when the number of regulated bridging loans transacted was at 31.5% of all lending.

Bridging loan volume transacted by contributors hit £213.35 million in Q3 2018, an increase of £15.4 million on the previous quarter. This is the highest figure to date and comes as another new contributor joins Bridging Trends- specialist finance packager, Clever Lending.

First legal charge lending increased to 84.4% of all loans during Q3 2018, up from 80.9% in the second quarter. Meanwhile, second charge loans decreased to 15.6% compared to 19.1% during Q2 2018.

For the second consecutive quarter, refurbishment purposes were the most popular reason for obtaining a bridging loan, as borrowers continued to add value to existing and newly purchased properties.

Mortgage delays were the second most popular reason for obtaining a bridging loan, accounting for 19% of all lending, down from 20% in the previous quarter. Whilst loans for auction purchases and business purposes increased in the third quarter by 3% and 1% respectively.

The average monthly interest rate dropped to 0.78% in Q3, from 0.83% in Q2 2018- the lowest rate recorded since Q4 2016. This activity translated into lower LTVs, with average LTV levels in Q3 decreasing by 1.5% to 55.4%.

The average completion time on a bridging loan application jumped to 46 days during the third quarter from 43 during the second quarter, as service and resource levels were impacted by annual leave.

The average term of a bridging loan in the second quarter remained at 11 months.

Key data points from Bridging Trends Q3 2018:

Regulated lending hits lowest level since 2015
Average monthly interest rate is lowest recorded since Q4 2016.
Refurbishment most popular use for bridging finance for 2^nd consecutive quarter
Clever Lending joins Bridging Trends as a contributor

Gareth Lewis, pictured, Commercial Director at mtf comments:

“The data continues to show that property investors are seeking attractive opportunities to acquire properties where they can add value, a trend that shows no sign of slowing down.

“Conversely the transaction flow in the regulated space has continued to show signs of slowing down. Is this a direct response to the everyday purchaser taking stock of Brexit and holding fire before looking to commit to the purchase of a new residence?”

Sonny Gosai, Head of Specialist Lending at Clever Lending comments:

“Clever Lending is privileged to be on board with Bridging Trends, which provides much needed analysis of the market. The bridging industry is booming at present and forms a large part of our key distribution and remains one of our main focuses.

“Whilst the data suggests that there has been a drop in regulated bridging activity, we have recently set up a team solely to provide regulated bridging advice as we have seen a growth in this area particularly for enquiries. It will certainly be interesting to see what the next quarter’s Bridging Trends results will be.”

Luke Egan, Head of Specialist Property Finance at Pure Commercial Finance comments:

“Regarding the drop in regulated bridging transactions, we operate slightly different to a lot of specialist brokers as we take a large amount of direct business, so we have more regulated bridge enquiries as a lot of clients are home movers. However, the market is becoming more competitive which would explain the decline to an extent as there is a finite amount of business being passed around a larger number of people.

“Interest rates seem to be only going one way. Therefore, I believe one of the main regulated bridging lenders will drop their rates again soon in order to stand out in a crowded marketplace.

“Completion times increasing again is a worry, speed seems to a forgotten pre-requisite of bridging and more of a USP these days.”