Bridging lending surges and average LTVs hit record high in 2021

The bridging market has seen a 38% increase in annual gross lending, reaching £626.7m in 2021, revealed the latest Bridging Trends data.

The year saw consistent levels of lending from contributors across three of the quarters (Q1: £144.5m; Q2: £146.5m; and Q4: £145.4m), with volume peaking in Q3 2021 to £190.24m as a result of the strong housing market activity, as buyers attempted to take advantage of the stamp duty holiday before it ended.

Regulated bridging loans accounted for an average of 40.8% of all contributor transactions in 2021.

Demand for regulated bridging was the highest in the first half of the year at 47.7% in Q1 and 41.6% in Q2 — as homeowners rushed to complete before the end of the stamp duty holiday — before falling to 37.7% in Q3 and 36% in Q4.

Second-charge bridging loan accounted for only 15% of total contributor transactions, the lowest annual figure recorded since Bridging Trends launched in 2015.

In 2021, average LTVs hit a record high of 56.9% — up from up from 50.7% in 2020, 52.9% in 2019, and 54.6% in 2018.

Meanwhile, average monthly interest rates fell to 0.79%, and the average loan term was 12 months.

However, the average bridging loan completion time increased to 52 days, compared to 50 the previous year.

The most popular uses for bridging finance were funding investment purchases (25% of all contributor completions) and chain breaks (18%).

In terms of bridging broker searches, Knowledge Bank data revealed that ‘maximum LTV’ was the most popular term, followed by ‘regulated bridging’ and ‘minimum loan amount’.

Dale Jannels, managing director at Impact Specialist Finance, said: “The full effects of the stamp duty holiday appear loud and clear in this latest set of Bridging Trends data, and it feels like a watershed moment for the bridging finance market.

“With it still being a sellers’ market in many parts of the UK, I expect regulated bridging to continue to be popular throughout 2022 and this is being mirrored in our business currently.

“With so much competition between lenders in the bridging finance space, the options now available to brokers and their customers are unrivalled, which are pushing up LTVs and reducing rates, so it’s never been a better time to use such a facility either for investment refurbishment purposes or to fund chain breaks.”

Joshua Elash, founding director of MT Finance commented: “While the year-end data for 2021 shows a positive and steady recovery in the demand for specialist lending following a challenging 2020, gross lending figures for the year remained significantly down on pre-pandemic 2019.

“As we move forward into 2022, we expect gross lending figures to fully recover and surpass the 2019 gross figures, as more and more investors return to the market with a view to take early advantage of the anticipated impact inflationary pressures will have on asset prices.”

Chris Oatway, director at LDNfinance, added: “In Q4 2021, we found there to be a number of lengthy solicitor delays across transactions in the market, so it’s not surprising we’re seeing that funding a chain break was a popular reason for bridging finance.

“Despite this, we have seen a strong start to 2022 and it’s promising to see that gross lending from contributors was up by almost 40% in 2021 against 2020.

“Based on the enquiry volumes we received in January, we anticipate a good year ahead.”

Chris Whitney, head of specialist lending at Enness Global, stated: “As a contributor to the data, it is always interesting to see what the finished report looks like and whether it reflects our own individual experiences on the ground, and the 2021 report definitely does.

“[This was] probably our busiest year ever in the short-term lending space, so no real surprise to see the 38% increase, although that is still amazing.

“Average interest rates falling was expected, as we saw new entrants and well-established players hustling for market share.

“This is probably a trend that will continue with the market feeling very liquid despite inflationary pressures.

“The continued decline in second-charge loans is slightly surprising; however, we have lost some lenders in this sector, and no one really seems to have filled the gap, so I think there is definitely room for some product and criteria innovation here.”

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