Investor demand for bridging finance continues in Q3

Michael Lloyd

November 5, 2019

Almost a quarter (22%) of all lending transacted by Bridging Trends’ contributors in Q3 was for investment purchase purposes, the latest data has revealed.

For the third consecutive quarter the most popular use of a bridging loan was to purchase investment property.

Gareth Lewis, commercial director at MT Finance, said: “Bridging loan activity for the third quarter remained stable.

“Coupled with the most popular uses this is a good indication of strong demand from borrowers seeking to purchase property fast while prices are low ahead of Brexit’s conclusion.

“It’s quite clear that the uncertainty of Brexit has had its effect on the London property market, with prices dropping significantly in many boroughs.

“This has prompted many property investors to utilise the speed of bridging loans to act quickly on opportunities.

“With the EU deadline now extended, it would be reasonable that we’ll see the same trends continue throughout the rest of the year.”

A traditional chain-break was the second most popular use for bridging finance, contributing to 20% of all lending in Q3 which is a quarterly increase of 2%.

Meanwhile, bridging loans for business purposes decreased to 6% in the third quarter.

Bridging Trends groups together the figures from lender MT Finance and specialist finance brokers including Brightstar Financial, Enness and Capital B Property Finance.

The data showed bridging loan growth weakened in Q3 as loan volumes transacted by contributors reached £181.64m, a £3.2m decrease on the previous quarter.

Chris Whitney, head of specialist lending at Enness, added: “I think these are strong and encouraging results.

“Whilst loan quanta were down on the previous quarter, it was less than 2% and during the summer holiday period as well.

“It is a buyers’ market right now, especially for international buyers who are also taking advantage of the weak pound.

“This, and suppressed prices due to the political uncertainty, means that many international buyers are picking up assets at over 20% lower than they might have been three years ago.

“Finance for international investors is widely available but the better loans tend to be with lenders who aren’t particularly quick.

“As it is a buyers’ market many get good purchase prices agreed on the basis they can complete within a relatively short space of time.

“This means that the demand for the quick and straightforward short-term loans is very strong, so I am not surprised that purchasing investment property is the most popular reason in the index.

“All in all, the bridging loan market continues to be strong and supporting the UK economy in many ways during difficult times.”

Almost half (42%) of total loans transacted by Bridging Trends contributors were regulated which is up from 37.5% in Q2.

The spike in regulated bridging activity translated into a lower average monthly interest rate in Q3 at 0.74%.

For the fourth consecutive quarter, the average term of a bridging loan remained at 12 months.

In addition, the average completion time on a bridging loan application in Q3 rose by seven days to 51.

Andre Bartlett, director of Capital B Property Finance, added: “”Capital B is delighted to be included in the latest Bridging Trends figures.

“Our success over the last 18 months has meant we are now recording enough data for our figures to play an important part of this invaluable measure of our market.

“The downside is average completion times for loans is heading in the wrong direction, but that may be due to matters outside of lenders’ hands.

“I would love to see the average completion time get down to below 40 days.”

Demand for second charge loans remained consistent at 18.4%.

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