Bridging loan volume dips in Q3

Bridging trends infographic

Bridging loan activity dropped slightly during the third quarter of 2017, according to the latest Bridging Trends data.

Data from Bridging Trends revealed contributor gross lending fell in the third quarter to £142.75 million, down 4.9% on the second quarter (£150.07m) but up 2% on the same quarter last year (£140.49 million).

Bridging Trends, a quarterly publication by bridging lender mtf and specialist finance brokers Brightstar Financial, Enness Private Clients, Positive Lending, and SPF Short Term Finance, launched in 2015 to monitor the general trends in the bridging finance market.

First charge lending remained solid in Q3 at 82%, indicating consistent investment in residential properties-to-let.  Whilst second legal charge lending increased for the second consecutive quarter rising to 18%, from 17.2% during Q2 2017.

Average LTV levels hit 49.6% during Q3 2017, up from 45.4% on the previous quarter, suggesting continuing investor confidence in the market.

Average monthly interest rates across 1st and 2nd charge lending decreased to 0.82% from 0.84% in the previous quarter as competition amongst lenders forced rates down.

42.9% of transactions were regulated in Q3, down from 46.1% in the previous quarter.

However, unregulated bridging loans continued to dominate the landscape, with the number of unregulated loans climbing to 57.1% of all lending- up from 53.9% in Q2.

The average completion time on a bridging loan application in Q3 increased by 4 days, as service and resource levels were impacted by annual leave.

Mortgage delays were the most popular reason for obtaining a bridging loan in Q3 2017, contributing to 31% of all lending and reversing the second quarter blip where refurbishment purposes exceeded mortgage delays.

Refurbishments were the second most popular reason for getting a bridging loan at 23%. Business Purposes was third at 13%- up from in 11% in Q2.

The average term of a bridging loan was 12 months during the third quarter, up from 11 months in the previous quarter.

Key data points from Bridging Trends in Q3 of 2017 are as follows:

  • Contributor lending dips 4.9% to £142.75m
  • Average monthly interest rates decreased 0.02%
  • Second charge lending rises for 2nd consecutive quarter
  • Mortgage delays return to most popular purpose

 

Joshua Elash, director of bridging finance lender mtf, comments:

“Unregulated bridging loans continued to outperform regulated bridging loans- with the implementation of the Prudential Regulatory Authority’s rules relating to the treatment of portfolio landlords, this upward trend is likely to continue for the foreseeable future as an increasingly larger number of professional property investors will consider bridging finance when purchasing a new property which they otherwise intend to refurbish and sell.”

Chris Whitney Head of Specialist Lending, Enness Private Clients, comments:

“I think when you keep in mind the fact that this was over the summer holiday, a drop of only about 5% in lending volumes compared to the last quarter is actually quite impressive.

“I was surprised the average interest rate hadn’t fallen further than it has. We have seen pricing under quite a bit of downward pressure as certain lenders fight to increase market share and protect what they already have from new entrants.

“I think some lenders in the sector need to start thinking about streamlining completion processes. If a sizeable part of the market is bridging the gap between desired acquisition time and a standard term mortgage being put in place, if that bridge is taking longer to get the benefits of having it will diminish until it gets to the point where it isn’t worthwhile.”

Paul McGonigle, Chief Executive, Positive Lending, comments:

“I noticed an increase in transactional activity at Positive Lending in this quarter – quite significantly so. What was evident, and this report suggests the same, is that the larger loan transactions have reduced during the period.

“We have also seen a spike in unregulated activity, where investors are purchasing to refurb and sell and this trend will continue.  As we approach the busiest quarter of the year it will be interesting to see how the new PRA changes impact the ability to obtain single unit investment properties in the more affluent areas, or if the investor looks toward more multi-unit properties for higher yields and a better opportunity to meet the lenders new income rules for professional landlords.  Bridging lending I am sure will be in rude health in Q4 despite these new rules.”

Bridging trends infographic

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