The UK’s bridging finance sector could be headed for a strong year in 2022, with the latest figures suggesting a full return to strength during Q3. Specifically, total bridging activity for the third quarter exceeded £190 million; the first time this has happened since 2018.
This also represented a significant 30% increase on the previous quarter and a huge 65% increase compared to Q3 last year.
Robust housing market activity is credited with much of the sector’s recent performance, as the countdown to the full withdrawal of the stamp duty holiday continues.
The data for the quarter takes into account bridging loan completions from a series of leading lenders and brokers, including Adapt Finance, Brightstar Financial, Capital B, Clever Lending, Complete FS, Enness Global, Finanta, Impact Specialist Finance, LDNfinance, Optimum Commercial, Sirius Group, and UK Property Finance.
Property Purchase Intent Tops the Table
The most common application for bridging finance during Q3 was for purchasing investment properties. Around 28% of all loans issued were used for this purpose. Traditional chain break followed in second place, accounting for 13% of all transactions – down from 20% in the previous quarter.
Auction finance saw a significant rise in popularity during Q3, accounting for 11% of all transactions – up from just 4% in Q2.
The vast majority of loans issued during the quarter were first to charge bridging loans – approximately 90% of all loans completed.
Average bridging loan LTVs increased from around 55% in Q2 to just over 60% in Q3 – the highest quarterly average recorded since 2015; a figure that indicates the trend among borrowers to maximising liquidity opportunities and leverage record-low interest rates while they remain.
Average bridging loan terms fell from 12 months in Q2 to 11 months in Q3, while average monthly interest rates came out at 0.72% – slightly down from the previous quarter’s 0.79%.
Speaking on behalf of Adapt Finance, co-founder Stephen Burns commented on the sector’s impressive return to strength.
“The most exciting part to read is ‘returns to’ when referring to activity levels,” he said.
“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.”
Elsewhere, managing director at Impact Specialist Finance, Dale Jannels, praised the flexibility and responsiveness of the UK’s leading bridging finance brokers.
“These figures show that bridging loans are now a better understood product for many brokers and they have much more confidence in recommending this solution to their customers,” he said.
“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.”
According to Chris Whitney, Enness Global’s head of specialist lending, the published figures could potentially represent the tip of a much bigger iceberg.
“Bridging Trends is a great concept and is fantastic at letting the industry know where the key indicators are heading and over the years, we have seen how micro and macro factors, such as Brexit, have impacted upon us.,” he said.
“However, with the news that contributor gross bridging loans are over £190m, it makes me wonder how big this market really is in its entirety.,”
“LTVs are up with borrowers possibly taking advantage of increasingly cheaper money in the light of reports that mortgage rates, in general, are heading upwards imminently,”
“However, with continuing competition and even more new entrants in the short-term lending space, it will be interesting to see how that pans out with so many lenders looking to increase market share in a seemingly very liquid environment. “
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