Bridging profits from residential delays
In Q2 a third (33%) of bridging loan applications were caused by mortgage delays, up from 8% in the first quarter. Overall lending volumes meanwhile surged from £80.47m in Q1 to £100m in Q2.
The report attributed the growth of bridging from delayed lending decisions to uncertainty in the lead up to the general election on May 7.
Regulated bridging was a strong performer, as the number of regulated loans rose by 15% to 47%. This activity led to lower average LTVs of 45.9% but longer turnaround times of 39 days.
Kit Thompson, director of Bridging at Brightstar Financial said: “It is really pleasing to see lending up by almost £20m for Q2 vs. Q1, which indicates the bridging sector is still in very rude health and there is continued demand for bridging finance as the sector continues to grow.
“The real stand-out stat for me this month is the average deal time of 39 days to complete a loan, up from 34 days in Q1.
“For me this is as a direct result of delays with surveyors (trying to keep up with demand) and legals. Those lenders, who can deliver quickly and with minimal fuss, are those best fit to take market-share.
“It’s not all about rate. The key-driving factor has historically been speed and 39 days to complete a bridging loan is not a stat I am particularly proud of. As an industry, we can and should do better.”
Refurbishment was the second best performer in the second quarter, while bridging loans for businesses fell to 16% from 24% in the first quarter.
Average monthly interest rate dropped as low as 0.91% and the average term stood at 11 months.
Chris Whitney, head of specialist finance at Enness Private Clients, said: “Pricing is still under downward pressure from strong competition, but how much lower can this go?
“The average completion time also killing the myth once touted that “If it’s not done in 2 weeks it’s just not bridging!
“However, I guess the big news is that lending volumes are up markedly. We have experienced this in the market overall (not just bridging) and it was definitely a post-election thing from our perspective.
“We had lots of clients (and indeed lenders) sitting on their hands until after the election with fears about property taxes, caps on rent increases etc.”
He added: “The residential mortgage team at Enness has also seen an increase in volumes for the same reasons, and will confirm that the residential mortgage lenders are struggling with the demand and struggling to turn things around in time.
“I think Bridging Trends data directly reflects just that- mortgage delays were at 8% in Q1 and jumped to a massive 33% in Q2. The question is has this just been a post-election spike? Or something that will carry momentum for the rest of the year?”
The Bridging Trends data was taken from lender mtf and packagers Brightstar Financial, Enness Private Clients, Positive Lending and SPF Short Term Finance.