There has been a 46% increase in bridging loan volume in the third quarter of the year, according to latest data from Bridging Trends.
Contributor lending transactions totalled £115.52 million in the third quarter of 2020 and although lending figures were 36% below the pre Covid-19 levels of £180.94 million, they were up 46% from the £79.4 million of bridging loans transacted in the previous quarter.
Regulated bridging lending continued to dominate the sector in Q3 at an average of 53% of all lending, compared to 47% of unregulated transactions.
The average weighted monthly interest rate in Q3 decreased to 0.78%, from 0.85% in Q2- falling back in line with rates offered before the Covid-19 outbreak (0.75%).
Average LTV levels in the third quarter increased to 51.7%, from 48.8% in Q2.
Demand for second charge lending dropped significantly, accounting for an average of 17.7% of total market volume in Q3 – down from 26.1% in Q2.
For the eighth consecutive quarter, the average term of a bridging loan remained at 12 months.
The average completion time of a bridging loan increased in Q3, with average processing times increasing to 52 days, from 50 days in the previous quarter.
For the seventh consecutive quarter, the most popular use of a bridging loan was to purchase investment property. 22% of all lending transacted by the report’s contributors in Q3 was for investment purchase purposes, dropping slightly from 25% during Q2 2020.
Both regulated refinance and a traditional chain break were the second most popular uses for bridging finance, contributing to 17% of all lending in Q3. Demand for regulated refinance increased by 8% and chain break by 7%.
Bridging Trends is a quarterly publication developed by short-term finance lender, MT Finance, as a method for monitoring the latest trends in UK bridging finance in order to offer a general snapshot of the industry. It covers data gathered from several specialist packagers operating within the UK bridging market: Adapt Finance, Brightstar Financial, Capital B, Clever Lending, Complete FS, Enness, Finanta, Impact Specialist Finance, Sirius Group , and UK Property Finance.
Chris Whitney, head of specialist lending at Enness, said: “Rates are down a bit, but I think we will see that drop much further in the next index, as price wars seem to dominate the market right now. LTV’s are still surprisingly modest suggesting responsible lending still dictates in most of the market. However, the front-page headline has to be the fact that lending volumes were up at over 45% higher than the previous quarter.
“From July onwards we saw some lenders who had been in a pandemic hibernation return so there was more choice of funding and others had started to go back to pre Covid-19 LTVs, making certain transactions viable again.
“In the last quarter lenders and key stake holders such as valuers and solicitors had also been able to refine systems and processes that had initially caused problems when lockdown hit in terms of handling volume.
“However, I don’t think the increase was purely a supply-led cause. We have seen huge demand from borrowers as well. Some perhaps starting previously postponed projects and others looking to put a war chest together in case a pandemic led trauma in the overall economy created opportunities for them.
“It just goes to show how robust the industry is and how important it is to the economy. I think demand will continue to increase as we still see many high street lenders closed to new businesses or being very restrictive as to what sectors they will lend into and on what terms.”