Bridging Trends: Transacted bridging loans down 4.5%
A total of £732.7m of bridging loans were transacted by contributors in 2019, which is a 4.5% year-on-year decrease.
In Q1 2019, £185.32m of bridging loans were completed, but the number of transactions cooled in Q3 and Q4.
Unregulated bridging loans accounted for 64% of all transactions, compared to 39% of regulated.
The average monthly interest rate in 2019 was 0.76%, which is the lowest figure seen since 2016.
Average LTV levels also decreased to an average of 53% from 55% LTV in 2018.
The split between first and second legal charge bridging loans remained consistent in the first three quarters of the year, before second charge loans soared to the highest level ever recorded by Bridging Trends in the fourth quarter, up from 18.4% in Q3 2019 to 23% in Q4 2019.
Second charge bridging loans accounted for an average of 20% of total market volume in 2019.
Funding an investment purchase was the most popular reason for obtaining bridging finance throughout the year, accounting for 23% of all loans.
A traditional chain break the second most popular reason for taking out a bridging loan, accounting for 18% of all loans in 2019.
The average loan term in 2019 was 12 months and the average completion time averaged 47 days in 2019.
Gareth Lewis, commercial director at MT Finance, said: “Despite a disruptive year for the property market owing to the political uncertainty, the figures provided for 2019 were encouraging.
“Property professionals have continued to utilise bridging finance as a tool to support their investment.
“We have also seen heavy refurbishment continue to grow as investors and developers look to maximise their capital returns.
“It will be interesting to see how next quarter’s figures will be affected as visibility on Brexit continues to improve.”
Kit Thompson, director of short-term lending and development finance at Brightstar, added: “I am not surprised that lending for 2019 was down on the previous year and that Q4 completions were also down vs the rest of the year.
“It was a difficult year in general with the general election and Brexit, but with a more stable government and Brexit done, I expect to see things moving again in 2020 for a better year.
“The level of new enquiries is high, and we have been extremely busy from early in the New Year.
“I expect those pipeline cases that were stuck in Q4 to complete now and things should start moving again now.
“Bridging demand remains high and with plenty of competition out there amongst lenders all flush with liquidity, there is pressure on rates to remain low – all good news for borrowers.
“I think we will see growth again in 2020.”
Chris Whitney, head of specialist lending at Enness, said: “I think these figures show how robust the short-term finance market now is.
“I am not surprised to see second charge loans increasing.
“My view is that the cost of funds has fallen in the sector to a level where a flexible second charge facility has become a very cost-effective finance solution compared to some more traditional options.
“Whilst the quantum of money fell it was less than 5% which in such a turbulent year, with Brexit and election uncertainties, I think we should be satisfied.
“My view is that the fall in loan quantum has a strong correlation to difficulties in getting properties valued at the right level, with valuers worried about where the economy was heading and having to use distressed sales as comparables with trading volumes lower.
“Therefore, many loans didn’t happen or did so at a lower level.
“I believe we have already seen a shift in valuer sentiment post-election, and I think 2020 will be a big year for this industry.”