There was a fall in demand for bridging loans during the second quarter of 2016 amid Brexit uncertainty, according to the latest Bridging Trends survey, conducted by bridging lender MTF and specialist finance brokers Brightstar Financial, Enness Private Clients, Positive Lending and SPF.
Bridging lending fell to £91.11m in the second quarter, 8% lower than £99.11m during the second quarter of 2015 and a 27.3% decrease on Q1 2016, when lending reached £125.35m, according to contributor data.
Unregulated bridging loans attributed for 51.5% of all contributor lending in Q2 2016, although the number of regulated loans hit a new high of 48.4% since Bridging Trends launched.
Second legal charge lending decreased to 16% of all loans during Q2 2016, from 17.5% in Q1 2016, impacted by the regulatory changes resulting from MCD.
Average loan to value (LTV) levels fell to 47.4% during Q2 2016 from 52.8% in Q1 2016 and the average completion time on a bridging loan application took 46 days, up from 37 days in Q1 2016, as lenders took a more cautious and conservative approach to lending amid Brexit and MCD.
For the fifth consecutive quarter, mortgage delays was the most popular reason for borrowers accessing a bridging loan, at 30% of all lending.
Refurbishment was the second most popular reason for getting a bridging loan in Q2 at 22% of all lending, followed by business purposes at 20%.
Joshua Elash, director of MTF, said: “Uncertainty in the run up to the Referendum seems to have contributed to a cooling off of the market. However, though there was a drop in lending volumes in Q2, the latest data has in fact shown a degree of consistency with the same quarter last year, where lending volumes were only 8% higher at £99.11 million.
“Overall, the sector is in good health. Cheaper rates of interest and lower loan to values continue to show that the bridging market is behaving responsibly.”
Kit Thompson, director of bridging and development Brightstar Financial, said: “It is no surprise that bridging lending was down for Q2 in the lead up to the referendum, with the fall-out of MCD, stamp-duty changes to buy-to-let and of course, the shock Brexit result.
“We have to bear in mind that March was a bumper month for the bridging industry as borrowers wanted to beat the stamp-duty changes, followed by inevitably quieter months in April and May.”