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Bridging Trends: Chain-breaks prove most popular use of bridging in Q1

Bridging chain break

For the second consecutive quarter, the most popular use of a bridging loan was to fund a chain-break, contributing to 20% of all loans in Q1 2021, according to the latest Bridging Trends survey.


However, the use of bridging to resolve chain-breaks was down from 23% during Q4 2020.

Purchasing an investment property was the second most popular use in Q1, at 19% of all lending, though this proved to be a drop from 21% in the previous quarter.

Demand for bridging loans for business purposes increased from 10% to 14%.

Total contributor lending increased to £144.51m, a 5% rise on the previous quarter (£137.22m); this was largely attributed to new contributors LDN finance and Optimum Commercial Finance joining the Bridging Trends data pool.

Regulated bridging loans transacted by contributors remained unchanged from the previous quarter, at 48% of total lending, while second charge transactions remained at 22% of market share.

The average weighted monthly interest rate in Q1 2021 was 0.74%.

This was marginally higher (0.02%) than in Q4 2020, and still cheaper than rates offered before the COVID-19 outbreak (0.80%).

The greatest shifts in Q1 2021 were the average loan-to-value (LTV), which rose to 55.2%, from 51.3% in the previous quarter.

The average term of a bridging loan climbed by one month to 12, falling in line with the same quarter in 2020.

The average completion time on a bridging loan application increased to 53 days in the first quarter of the year, up from 50 days in Q4 2020; this is the highest figure recorded since Bridging Trends launched in 2015.

The top criteria search made by bridging finance brokers during Q1 was ‘maximum LTV,’ according to data supplied by Knowledge Bank.

Followed by ‘regulated bridging’ and ‘minimum loan amount.’

This further indicates the growing demand for higher LTV products on new home purchases.

Kimberley Gates, head of strategic partnerships at Sirius Property Finance, said: “Given the turbulence of the past year and the pressure to meet the SDLT relief deadlines, it is to be expected that chain breaks are the most popular use for bridging finance for a second consecutive quarter.

“That said, we are finding that bridging is increasingly being seen as an important part of any savvy investor’s toolkit and not just a last resort.

“We certainly always consider the suitability of bridging products when structuring our clients’ finance packages and in particular for those seeking to move quickly and make the most of the many opportunities in the property market currently for portfolio growth, thus it is no surprise that ‘Investment Purchase’ follows as a close second for the top purposes for bridging finance.”

Dale Jannels, managing director of Impact Specialist Finance, said: “I’m not surprised that chain break finance is top of the reasons to use bridging loans.

“Property transactions are booming and we’re seeing a large number of solicitors trying to exchange and complete on the same day.

“This inevitably will result in people pulling out of purchases late on and therefore clients need a short-term loan to fill the gap their buyer left behind.

“This brings a great opportunity to the sector, especially with the addition of the next SDLT deadline looming on the horizon.”

Gary Latham, Managing Director of UK Property Finance, said: “We are a little surprised to see ‘regulated bridging’ listed as one of the top criteria search terms.

“However, the buoyancy in many parts of the UK housing market, particularly owner-occupied, has increased the call for quick funding.

“We are now seeing cases where some estate agents are no longer accepting regular mortgage AIPs but instead want to see that the funding is already immediately available, or in progress, before presenting offers to vendors.”

Chris Whitney, head of specialist lending at Enness, said: “I think we are very lucky to have the range of products at our disposal that we do.

“20% of the total loans arranged by contributors being for chain breaks is an awful lot of individuals, families, and companies whose lives have been helped in very challenging times by the short-term lending industry.

“Interesting to see the cost of funds being taken going up slightly when lenders seem to think the price is where the battleground is.

“Perhaps it is more about getting access to the product that is the right fit at the right time.

“The continuing increase in completion times does not surprise me. We are seeing that on the ground.

“‘When do you need the funds for’ is a question that must be asked and explored very early on now.

“Having a great product is rarely of use if it cannot be delivered promptly.

“A pleasant surprise was that re-bridges hadn’t increased and had gone down.

“Possibly an indicator that borrowers were making the right choices regarding terms, and/or lenders are being supportive and as flexible as they can be about repayment.

“As always it is really interesting to see this pooled data and compare that to what we are experiencing on the ground.”

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