Bridging Lending Hits Over £190M In Third Quarter
11th November 2021
Gross lending by contributors to the survey reached £190.24m in the third quarter of 2021, marking the highest volume recorded since Q4 2018.
Lending was up 30% on the £146.52m recorded in the previous quarter and 65% higher than the £115.52m reported in Q3 2020.
Contributors attributed the growth to strong housing market activity ahead of the tapering of the stamp duty holiday.
The research combines bridging loan completions from several specialist finance packagers, including Adapt Finance, Brightstar Financial, Capital B, Clever Lending, Complete FS, Enness Global, Finanta, Impact Specialist Finance, LDNfinance, Optimum Commercial, Sirius Group and UK Property Finance.
For the second consecutive quarter, the purchase of an investment property was the most popular use for a bridging loan, accounting for 28% of total contributor transactions, up from 24% in Q2.
A traditional chain break was the second most popular use at 13%, down from 20% in Q2, while demand for auction finance surged from 4% to 11%.
First charge bridging loan transactions remained unchanged from the previous quarter, accounting for 90% of total market volume in Q3.
Regulated bridging loans transacted by contributors decreased for the fifth consecutive quarter, falling to 37.7% from 41.6% in Q2.
The average LTV rose to 60.2%, up from 54.9% in Q2, marking the highest average LTV recorded since Bridging Trends launched in 2015. This suggests borrowers were taking advantage of lower rates to maximise available liquidity.
Demand for higher LTV products was also reflected in data from Knowledge Bank, which reported that maximum LTV was the most searched bridging finance criterion in Q3.
The average monthly interest rate fell to 0.72% in Q3 2021, down from 0.79% in Q2, highlighting the high levels of liquidity and competition across the sector.
The average term of a bridging loan fell from 12 months to 11, while processing times returned to Q1's record high of 53 days, up from 47 days in the previous quarter.
Chris Whitney, Head of Specialist Lending at Enness Global, commented:
“Bridging Trends is a great concept and is fantastic at showing the industry where key indicators are heading. Over the years, we have seen how both micro and macro factors, such as Brexit, have impacted the sector.
“However, with contributor gross bridging loans exceeding £190m, it raises the question of just how large the bridging market is in its entirety.
“LTVs are up, with borrowers potentially taking advantage of increasingly cheaper money amid reports that mortgage rates more generally could be heading upwards.
“With continued competition and even more new entrants in the short-term lending space, it will be interesting to see how the market develops as lenders look to increase market share in what remains a highly liquid environment.
“At 60% LTV, we are still seeing prudent levels of borrowing and responsible lending from funders.
“I was not surprised to see processing times increase. With higher volumes, transactions have naturally taken longer, while many lenders have struggled to recruit experienced underwriters and valuers have been stretched to capacity.
“With investment purchases remaining the most common use of funds, the figures also demonstrate the continued confidence many borrowers have in UK real estate.”
