Loans in the bridging sector lifted 14% in the second quarter to £178.4m compared to the first three months of the year, according to MT Finance, as a “continued shortage of stock means there has been no let-up in terms of pressure on buyers”.
The second quarter figure is up 22% on the same period a year ago, says the short-term lender’s quarterly Bridging Trends report. The rise was also the third consecutive quarter of growth.
Loans to buy an investment property remained the most popular use of bridging finance in the quarter – at 24% of total transactions – falling from 26% in the previous quarter. The second most popular use was to ‘chain break’ – accounting for 21% of total transactions in the second quarter.
High rates of market activity were demonstrated by “several [bridging loan] purchasers competing for the same property in some instances”, the report says.
It adds: “Those who are not cash buyers are putting themselves ahead of the competition by turning to bridging finance for a rapid cash injection, highlighted by the increase in bridging loans for auction purchases, which doubled from 2% in the first quarter to 4% in the second quarter.”
But regulated refinance saw the greatest shift in demand in the period, jumping to 10% of total transactions from 5% in the previous quarter.
The study says: “This shift could indicate that more homeowners looked to enhance their properties in the second quarter, rather than move and compete in a busy market.”
It adds that “lender competition” continued to drive bridging rates down to record lows in the second quarter, with the average monthly interest rate falling to 0.69%, down from the previous record low of 0.71% reported in the first three months of the year.
Loan-to-value ratios edged up slightly from 54.5% in the first three months to 56.1% in the second quarter.
Average loan completion times rose to 57 days from 53 days in the previous quarter, as valuers and conveyancers saw “an increase in demand for their services from buyers working to tight deadlines”.
The split between regulated and non-regulated bridging loans remained consistent with the previous quarter with regulated loans accounting for 43.3% of the market, down from 43.9% in the first three months.
The top criteria searches made by bridging finance brokers during the period remained unchanged from the previous quarter – ‘regulated bridging’ was first, followed by ‘minimum loan amount’, according to data supplied by Knowledge Bank.
Second-charge loans accounted for an average of 16% of total market volume in the period – up from 12% in the first quarter. The average term of a bridging loan remained 12 months.
MT Finance commercial director Gareth Lewis says: “The bridging market has been fiercely competitive in recent times which has led to rate reductions, and bespoke pricing being offered.
“This trend has enabled lenders to create a competitive edge to try and gain market share. However, will we continue to see this in the coming months? I doubt it.
“Base rate increases and swap rate volatility have been ever present in 2022, but their impact has yet to be truly seen in the bridging sector, as it has throughout the mortgage market.
“As pressure continues to build and funding costs increase, I expect to see the start of movement in our sector in the coming months.”
