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Bridging lending returns to 2018 levels

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Contributor gross bridging lending reached £190.24m in Q3 2021, the highest volume seen since Q4 2018, according to new Bridging Trends data.

This surge is attributed to strong housing market activity ahead of the tapering of the stamp duty holiday and is the highest volume seen since £201.57m in Q4 2018.

Bridging Trends combines bridging loan completions from 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, at 28% of total contributor transactions, up from 24% in Q2.

A traditional chain break was the second most popular use at 13%, a drop from 20% in Q2. Meanwhile, demand for auction finance surged from 4% in Q2 to 11% in Q3.

First charge bridging loan transactions remained unchanged from the previous quarter, accounting for 90% of the total market volume in Q3.

Whilst regulated bridging loans transacted by contributors decreased market share for the fifth consecutive quarter, falling to 37.7%, from 41.6% in Q2.

The average loan-to-value (LTV) in Q3 jumped to 60.2%, up from 54.9% LTV in Q2, this is the highest average LTV ever recorded since Bridging Trends launched in 2015.

Demand for higher LTV products was also a sentiment reflected in data provided by Knowledge Bank, which reported the top criteria search made by bridging finance brokers on their system in Q3 was “maximum LTV”.

The average monthly interest rate in Q3 2021 was 0.72%, down from 0.79% in Q2 and the average term of a bridging loan in Q3 fell from 12 months to 11.

And bridging loan processing times returned to Q1’s record high of 53 days, up from 47 days in the previous quarter.

Dale Jannels, managing director of Impact Specialist Finance, said: “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 of LDNfinance, added: “It surprises me that the average LTV is at record high levels at just 60%. In general, we have seen considerable demand for higher leverage deals at 70% to 75% LTV, where clients keep as much equity in their back pockets for future investments.

“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.”

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