Bridge loan market flat at £146.5m in second quarter
The bridging loan market remained flat in the second quarter, rising to £146.5m from £144.5m in the first quarter, with first-load loans making up the majority of lending.
According to the quarterly publication Bridging Trends, developed by MT Finance, initial bridging loan applications accounted for 90% of market volume, up 12.2 percentage points from the previous quarter.
The report says this was partly driven by investors and owners seeking to take advantage of the stamp duty holiday.
Financing the purchase of an investment property was the most common reason for using the bridge loan, which represents just under a quarter of transactions by contributors, up slightly from Q1.
Breaking the traditional chain was the second most popular use of bridge financing with 20% of transactions, roughly matching the previous quarter.
Regulated refinancing fell to 5% of contributor transactions, from 13% in the previous quarter.
Regulated bridge loans fell in the second quarter from 47.7% to 41.6%.
The report notes that average monthly interest rates rose slightly in the second quarter to 0.79% from 0.74% in the previous quarter.
Average transition times were 12 months with no quarterly changes.
The average loan-to-value ratio fell slightly from 55.2% to 54.9%, which the report says implies that borrowers are “not moving”.
The processing time for a loan application also decreased, with average processing times set at 47 days, compared to 53 days in the first quarter. This is the lowest completion time since the second quarter of 2019.
Gareth Lewis, commercial director at MT Finance, said: “As buying would have been at the forefront of people’s minds due to the stamp duty saving, it is no surprise to see that home loans first charge have significantly increased their share of transactional volumes.
“It will be interesting to see if this percentage decreases in the coming months as consumers seek to raise funds on existing properties to fund other property or business acquisitions.”
Enness head of specialist lending, Chris Whitney, added: “It looks like we’ve hit a fairly stable platform over the last couple of quarters. All previous pandemic concerns appear to have been pushed aside, with the stamp duty holiday deadline creating a frenzy of activity. The higher level of investment purchases shows that confidence in the UK property market is strong.
“I’m a bit surprised that loan volumes haven’t increased. The market was certainly very busy as we struggled to get appraisers out in a timely manner due to volumes and many lawyers had to burn midnight oil to keep up with demand.
Stephen Watts, Brightstar Financial’s transition and development finance specialist, said it was encouraging to see turnaround times have shortened since last quarter, as he suggested lenders were streamlining their processes to include remote assessments.
He added: “Some lenders are now offering AVMs of up to 75% loan to value (LTV) under certain circumstances and with the ability for asset managers to benefit from modern technology and to hold virtual meetings. with customers, more loan applications benefit. time-saving factors.