Bridging lending returns to 2018 levels, reveals Bridging Trends data

The latest Bridging Trends data has revealed that the volume of gross bridging lending transacted by its contributors in Q3 2021 hit the highest level since Q4 2018, reaching £190.24m.

This is a significant jump from the £146.52m registered in the previous quarter and a 65% annual increase compared to last year (£115.52m).

The rise in bridging lending volumes is attributed to the strong housing market activity ahead of the tapering of the stamp duty holiday.

The purchase of an investment property remained the most popular use for a bridging loan for the second consecutive quarter — representing 28% of total contributor transactions (up from 24% in Q2) — followed by traditional chain break at 13%, lower than the 20% level in the previous quarter.

Meanwhile, demand for auction finance surged from 4% in Q2 to 11%.

First-charge bridging loan transactions remained unchanged from the previous quarter, accounting for 90% of total market volume.

However, regulated bridging loans transacted by contributors dropped again for the fifth consecutive time, falling to 37.7% from 41.6% in Q2.

The data also revealed a record average LTV of 60.2% (up from 54.9% in Q2) — the highest ever seen since Bridging Trends launched in 2015 — which illustrates that borrowers are maximising liquidity opportunities and taking advantage of low rates to leverage more than before.

Meanwhile, average monthly interest rates decreased to 0.72% from 0.79% in Q2, and average loan terms dropped from 12 months to 11.

However, bridging loan processing times returned to Q1s record high of 53 days, up from 47 days in the previous quarter.

Stephen Burns, co-founder of Adapt Finance, said: “The most exciting part to read is ‘returns to’ when referring to activity levels. 

“It shows the industry was affected by the disruption the coronavirus pandemic put the country through, but more so, how it has pulled back quickly, and we are now firing on all cylinders!”

Dale Jannels, managing director at Impact Specialist Finance, added: “These figures show that bridging finance is now a better understood product for many brokers and they have much more confidence in recommending this solution to their customers. 

“The stamp duty holiday has helped bridging finance to be more widely accepted by the mainstream industry as a need to meet speed demands, but investors with the intention to renovate have also been at the forefront of recent requests.”

Chris Oatway, director at LDNfinance, expressed his surprise that the record average LTV was only 60%, as he claims the firm saw considerable demand for higher leverage deals at 70% to 75% LTV.

“Regulated transactions accounting for over a third of the market stands out when you consider the limited number of bridging lenders who are able to transact regulated business and shows there’s opportunity there for more lenders to enter this market,” he added.

Chris Whitney, head of specialist lending at Enness Global, stated: “With the news that contributor gross bridging loans are over £190m, it makes me wonder how big this market really is in its entirety.

“LTVs are up with borrowers possibly taking advantage of increasingly cheaper money in the light of reports that mortgage rates in general are heading upwards imminently. 

“However, with continuing competition and even more new entrants in the short-term lending space, it will be interesting to see how that pans out with so many lenders looking to increase market share in a seemingly very liquid environment. 

“At 60% LTV, I think we are still seeing prudent levels of borrowing by people and responsible lending from the funders.”

Whitney added that he was not surprise by the rise in processing times, claiming this is due to the increased volumes, as well as lenders struggling to recruit good underwriting and valuers being stretched to the limit.

“With the highest use of funds being for investment purchase I think it really shows how much confidence people have in UK real estate,” he concluded.

Leave a comment