Funding a chain break was the most popular reason for taking out a bridging loan in the first quarter of this year, shows data from MT Finance.
The lender’s quarterly bridging trend survey shows that 20% of all transactions were taken out for this reason. The second biggest reason was to fund an investment purchase, at 19%, and the third most popular reason was for business purposes, the reason for 14% of loans taken out.
This is the second quarter in a row that funding a chain break was cited as the biggest reason for bridging, although it was down from 23% at the end of 2020.
The three top criteria searches were: maximum LTV, regulating bridging and minimum loan amount.
Further data shows that the average monthly interest rate grew last quarter, from 0.72% in Q4 2020 to 0.74% in the first three months of 2021. Alongside this, the average LTV rose from 51.3% to 55.2%.
And total gross lending increased too – from £137.22m to £144.51m across the same time frame.
Impact Specialist Finance director Dale Jannels says: “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 stamp duty deadline looming on the horizon.”
Enness head of specialist lending Chris Whitney adds: “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.”
