Bridging loan volumes down; second charge use up | Mortgage Strategy

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The latest MT Finance-authored Bridging Trends report shows that there was a near-halving of gross loan volumes in the H1 2020, while second charge lending hit highest ever levels.

In total, bridging loan volumes came in at £202m in the first half of this year, which compares to £370m in the first half of 2019.

This decrease was “inevitable,” says Adapt Finance co-founder Stephen Burns, but “the amount of change is staggering, despite lockdown.”

At the same time, second charge lending, making up just over 26 per cent of total market volume, hit its highest level.

Looking at the bridging sector on a quarterly basis, Q2 2020 saw regulated transactions make up nearly 56 per cent of all lending, which is a significant increase on the 37.5 per cent seen in Q2 2019.

The report also shows that the average monthly interest rate in Q2 of this year moved up 0.8 per cent to 0.85 per cent from Q1, the highest average interest rate since Q3 2016.

As well as this, the average LTV dropped from 51 per cent in the first quarter of this year to 48.8 per cent, which, the report says, “could be attributed to the number of bridging lenders removing high LTV products from their product ranges during the lockdown period.”

The three most popular uses for a bridging loan were for investment purposes, at 25 per cent, re-bridging, at 13 per cent, and then for a business purpose, at 12 per cent.

MT Finance commercial director Gareth Lewis says: “We are presently living through unprecedented levels of uncertainty and the drop in bridging transactions is not wholly unexpected, given the restrictions on conducting physical valuations until May, servicing challenges, and significant uncertainty around any possible economic downturn.”

Sirius Finance associate Craig Booth comments: “We cannot be surprised at decreased lending and a higher rate average, the first inevitable and the second due to changes in risk. What is surprising is the re-bridging of a bridging loan increase. Supporting existing clients should be just as important as new business in challenging markets.”

Dale Jannels, Impact Specialist Finance manging director Dale Jannels adds: “We have all seen the huge impact on the markets from the last five months.

“But since restrictions started to ease, we’ve seen a large influx of enquiries for short term lending, especially relating to refurbishment, development and upsizing/downsizing.”


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