Bridging trends

Annual bridging lending plummets by £278m and regulated activity surges

The latest Bridging Trends data revealed a £278m decrease in the total volume of bridging lending transacted by contributors in 2020 due to Covid-19 disruption.

The impact of the pandemic was most evident in the first half of the year, when national lockdown measures were implemented. 

In Q1 2020, £122.86m of bridging loans were transacted by contributors, before volumes fell to £79.4m in the second quarter as restrictions continued.

Encouragingly, volumes rose in the second half of the year to £115.52m in Q3 2020 and to £137.22m in Q4 2020.

In addition, the data revealed that there was a near equal split between regulated and unregulated transactions, with regulated bridging increasing market share to an average of 49.4% of gross lending in 2020, compared to 39% in 2019 and 36% in 2018.

This is a result of bridging lenders stepping in to fill the gap to meet the needs of homebuyers, with the mortgage market struggling to cope with the growing demand.

Other significant results highlighted by Bridging Trends:

  • average LTV levels decreased to 50%
  • average monthly interest rate fell to 0.72% in the fourth quarter — the lowest-ever rate recorded by Bridging Trends since its launch in 2015.
  • average completion time stood at 50 days, up from 47 days in 2019 and 45 days in 2018
  • average loan term in 2020 was 12 months, the same as in 2019
  • second-charge transactions peaked to the highest level recorded, at 26.1% of gross loan volume
  • chain break was the most popular purpose for bridging in Q4

Gareth Lewis, commercial director at MT Finance, said: “After the first lockdown, we saw the re-emergence of some larger lenders and, if you combine this with the stamp duty changes, it is no surprise that there was a stimulus on rates and regulated bridging in the latter part of the year.

“As the vaccine rolls out and we gradually emerge from this lockdown, I believe we will see a new transactional flow from renewed confidence in the economy and businesses re-establishing themselves.”

Dale Jannels, managing director at Impact Specialist Finance, commented: “The impact of the pandemic on the bridging sector is shown clearly in Q4’s data, but it also alludes to the activity we are now experiencing, some of which, but not all, is related to the stamp duty holiday deadline.

“It’s clear though that bridging finance is becoming better understood by the wider broker market, not just those in the specialist sector, and there is more confidence about the options it can provide customers, which should mean that 2021 could see a real watershed moment for this type of finance.”

Kevin Blount, head of operations at Clever Lending, added: “We certainly had an increase in enquiries during the second half of the year which led to a spike in new business submitted to lenders in Q4. 

“We are working hard with lenders to find solutions who, in turn, are reviewing their criteria and interest rates to fit the current market.”

He stated that the stamp duty holiday had helped to bring business to the bridging market, which was continuing into 2021.

Chris Whitney, head of specialist lending at Enness, said that he was surprised the fall in lending in 2020 was so great, as the market had always ‘felt busy’ to him and Enness did not see such a big drop in volumes.

“Some big names in bridging closed their doors and some still aren’t back as they were — however, most of the short-term lending market either caried on throughout or paused only temporarily, as working practices were refined and made fit for purpose under the restrictions we faced.

“The absence of some big names [which] reduced supply, coupled with some restricting LTVs, has had a marked impact on lending levels," he explained.

“However, as the trend in Q3 and Q4 indicated, we believe volumes will bounce back quite quickly and, with people re-entering the market, the data is reflecting the stiff competition lenders face for business in terms of lower interest rates.”

He claimed that some big, high-street names did not step up to the challenge to support customers as they should have, which resulted in borrowers being turned away or facing "a huge amount of red tape" and not getting the support they needed.

“Overall, the short-term lending market can be proud of what it managed to achieve."

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