Packager contributors to Bridging Trends reported a total of £190.24m in bridging loans transacted in the third quarter of this year.
This was a notable increase from the £146.52m the previous quarter and an annual percentage increase of 65% (£115.52m).
This rise is attributed to strong housing market activity ahead of the tapering of the stamp duty holiday and is the highest volume seen since Q4 2018’s, £201.57m.
For the second consecutive quarter the purchase of an investment property was the most popular use for a bridging loan, at 28% of total contributor transactions – up from 24% in Q2.
A traditional chain break was the second most popular use at 13%, a drop from 20% in Q2. Meanwhile, demand for auction finance surged from 4% in Q2 to 11% in Q3.
First charge bridging loan transactions remained unchanged from the previous quarter, accounting for 90% of total market volume in Q3. Whilst regulated bridging loans transacted by contributors decreased market share for the fifth consecutive quarter – falling to 37.7%, from 41.6% in Q2.
The average loan to value (LTV) in Q3 jumped to 60.2%, up from 54.9% LTV in Q2 – this is the highest average LTV ever recorded since Bridging Trends launched in 2015. This illustrates that borrowers are maximising liquidity opportunities and taking advantage of low rates to leverage more than before.
Demand for higher LTV products was also a sentiment reflected in data provided by Knowledge Bank, which reported the top criteria search made by bridging finance brokers on their system in Q3 was “maximum LTV”.
The average monthly interest rate in Q3 2021 was 0.72%, down from 0.79% in Q2, highlighting the large levels of liquidity in a continually competitive space.
The average term of a bridging loan in Q3 fell from 12 months to 11. Bridging loan processing times returned to Q1’s record high of 53 days, up from 47 days in the previous quarter.
Bridging Trends combines bridging loan completions from a number of specialist finance packagers operating within the UK bridging market.
Stephen Burns, co-founder of Adapt Finance, said: “The most exciting part to read is ‘returns to’ when referring to activity levels. It shows the industry was affected by the disruption the Coronavirus pandemic put the country through, but more so, how it has pulled back quickly, and we are now firing on all cylinders.”
Dale Jannels, managing director of impact Specialist Finance, added: “These figures show that bridging finance is now a better understood product for many brokers and they have much more confidence in recommending this solution to their customers.
“The Stamp Duty holiday has helped bridging finance to be more widely accepted by the mainstream industry as a need to meet speed demands, but investors with the intention to renovate have also been at the forefront of recent requests.”
