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Bridging dip expected but lenders must cut completion time

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  • 19/10/2017
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Bridging dip expected but lenders must cut completion time
Bridging lending dropped slightly in the third quarter, though it remains higher than at the same time last year.

That is according to the latest data from Bridging Trends, a quarterly publication by lender MTF and specialist brokers Brightstar Financial, Enness Private Clients, Positive Lending and SPF Short Term Finance.

Gross lending by Bridging Trends contributors fell to £142.8m in the third quarter, down 4.9% on Q2 (£150.1m) but remained up 2% on the same quarter last year (£140.5m). However, commentators said lenders should work hard to cut completion times, which rose by four days.

Chris Whitney, head of specialist lending at Enness Private Clients, said the slight drop in lending was not a concern. “When you keep in mind that this was over the summer holiday, a drop of only about 5% in lending volumes compared to the last quarter is actually quite impressive.

“I was surprised the average interest rate hadn’t fallen further than it has. We have seen pricing under quite a bit of downward pressure as certain lenders fight to increase market share and protect what they already have from new entrants,” he said.

 

LTV up, interest rates down

First charge lending accounted for 82% of the total, which the report said showed consistent investment in residential properties-to-let. Second legal charge lending increased for the second consecutive quarter: up to 18% from 17.2%.

Average loan-to-value (LTV) levels reached 49.6% during the quarter, up from 45.4% in Q2. Meanwhile, average monthly interest rates across all lending decreased to 0.82% from 0.84% in the previous quarter as competition among lenders forced rates down.

Unregulated bridging loans continued to dominate the landscape, with the number climbing to 57.1% of all lending, up from 53.9% in Q2.

The average completion time on a bridging loan application in Q3 increased by four days, which the survey said was down to annual leave impacting service and resource levels.

 

Streamlining process

Whitney added that the industry must work to bring this down. “Some lenders in the sector need to start thinking about streamlining completion processes,” he said.

“If a sizeable part of the market is bridging the gap between desired acquisition time and a standard term mortgage being put in place, if that bridge is taking longer to get the benefits of having it will diminish until it gets to the point where it isn’t worthwhile.”

Mortgage delays were the most popular reason for obtaining a bridging loan, contributing to 31% of all lending and reversing the second quarter blip where refurbishment purposes exceeded mortgage delays.

 

Unregulated rise

Refurbishments were the second most popular reason at 23%, followed by business purposes at 13%. The average term of a bridging loan was 12 months, up from 11 months in the previous quarter.

Joshua Elash, director of bridging finance lender MTF, said the rise in unregulated loans is likely to continue with the implementation of the Prudential Regulatory Authority’s rules relating to the treatment of portfolio landlords.

“This upward trend is likely to continue for the foreseeable future as an increasingly larger number of professional property investors will consider bridging finance when purchasing a new property which they otherwise intend to refurbish and sell.”

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