Bridging loan volumes declined by £167.88m to £202.26m in the six months to the end of June 2020, according to the latest Bridging Trends survey.
This compares to £370.14m in transactions during the first half of 2019.
Contributor bridging loan volume was £122.86m in the first quarter of 2020, falling sharply from £180.94m in the final quarter of 2019 – activity further declined in the second quarter to £79.4m.
Second charge lending peaked to the highest level since Bridging Trends launched in 2015, accounting for an average of 26.1% of total market volume in Q2 2020 – up from 24.4% in Q1 2020 and 23% in Q4 2019.
Regulated bridging lending hit a record high in Q2 2020, increasing its market share to an average of 55.6% of all lending, compared to 37.5% in the same quarter of 2019. This is the first-time regulated transactions outperformed unregulated transactions since Bridging Trends launched.
The average weighted monthly interest rate in Q2 2020 increased to 0.85% – up from 0.8% in Q1 and 0.75% in Q4 2019. This is the highest average monthly interest rate recorded in Bridging Trends data since Q3 2016.
Average LTV levels decreased to 48.8% in Q2, from 51% in Q1 2020 and 54.1% in Q4 2019. This could be attributed to the number of bridging lenders removing high LTV products from their product ranges during the lockdown period.
For the seventh consecutive quarter, the average term of a bridging loan remained at 12 months.
Despite operational difficulties brought on by Covid-19, the average completion time on a bridging loan application has remained consistent over the last four quarters, reporting an average completion time of 50 days in Q2 2020, 49 days in Q1 2020 and 51 days in both Q4 and Q3 of 2019.
For the sixth consecutive quarter, the most popular use of a bridging loan was to purchase investment property. 25% of all lending transacted by the report’s contributors in Q2 2020 was for investment purchase purposes, increasing from 20% during Q1 2020 and 22% in Q4 2019. The data highlights how property investors continue to opt for bridging loans to purchase property, against a backdrop of ongoing uncertainty.
Refinancing a bridging loan was the second most popular use for bridging finance, contributing to 13% of all lending in Q2 2020, up from 8% in Q1 2020 and 11% in Q4 2019.
Gareth Lewis, commercial director at MT Finance, said: “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.
“MT Finance has seen a definite increase in second charge loans as business owners continue to invest to help support their business.”
Dale Jannels, managing director at Impact Specialist Finance, added: “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 (where the client needs to secure their next property, but have not sold the current one).
“There have been some fantastic deals engineered and the bridging lenders really do appear to have a huge appetite to assist all different types of clients and scenarios.”
