Landlords took advantage of the stamp duty holiday deadline and tenant demand to buy properties with bridging loans, although the overall market remained “steady”, according to MT Finance data.
Bridging loans hit £146.5m in the second quarter of the year, up 1.4% on the previous three months, says the firm’s Bridging Trends Q2 2021 report.
It says: “Property investors and landlords took advantage of tenant demand and the stamp duty holiday deadline at the end of the second quarter to expand their portfolios.”
The data adds that funding the purchase of an investment property returned as the most popular use for bridging finance in the period, amounting to 24% per cent of all transactions – up from 19% in the first quarter.
It also says that first-charge bridging loan applications soared in the second quarter, “again motivated by the desire to take advantage of the full stamp duty holiday”.
These types of loans accounted for 90% of total market volume in second quarter, up from 77.8% on the previous three months.
Earlier this week, the proportion of landlords reporting rising tenant demand hit a five-year high, according to data from Paragon Bank.
Also, earlier this month, the stamp duty nil-rate threshold was reduced from £500,000 to £250,000 until the end of September.
From 1 October, the threshold will return to £125,000 – or £300,000 for first-time buyers purchasing a property worth up to £500,000.
The Bridging Trends report says that the average monthly interest rate for bridging loans in the second quarter was 0.79%, up from 0.74% in the first quarter.
It adds that average loan-to-value levels edged down to 54.9%, from 55.2% in the previous quarter “suggesting borrowers are not overstretching themselves”.
The survey says: “Bridging loan application processing times reduced significantly as brokers, lenders, surveyors, and solicitor firms all battled to complete property deals before the stamp duty holiday started to taper off.”
Average completion times on bridging loan applications in the second quarter fell to 47 days, from a record 53 days in the first quarter. The current completions time is the lowest figure since the second quarter in 2019, which was 44 days.
The average term of a bridging loan remains at 12 months.
MT Finance commercial director Gareth Lewis says: “As purchases would have been at the top of people’s minds due to the stamp duty saving, it’s no surprise to see that first-charge lending has significantly increased its share of transactional volumes.
“It will be interesting to see if this percentage decreases in the coming months as consumers look to raise finance out of existing properties to fund further property acquisitions or businesses.”
Enness head of specialist lending Chris Whitney adds: “It looks like we have reached quite a stable platform over the last two quarters.
“Any previous pandemic worries seem to have been put to one side with the stamp duty holiday deadline creating a frenzy of activity.
“The higher level of investment purchases shows confidence in the UK property market is strong.
“I am slightly surprised that lending volumes weren’t higher. The market certainly felt very busy as we struggled to get valuers out in a timely manner due to volumes and many a solicitor was having to burn the midnight oil to keep up with demand.
“Nice to see the time it takes to draw a loan heading in the right direction albeit was that again stamp duty deadline linked? It will be interesting to see where that is at in the next quarter.”
