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Homeowners turn to bridging in Q4 but 2020 lending plummets 38 per cent

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  • 29/01/2021
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Homeowners turn to bridging in Q4 but 2020 lending plummets 38 per cent
Homeowners turned to bridging to break their property chains in quarter four, but despite the rise in mainstream demand lending fell by £278m in 2020.

 

In the three months to December, almost a quarter of all bridging loans were used to break a property chain, according to the MT Finance Bridging Trends report.

In the first three quarters of the year an investment purchase was the most popular reason for taking bridging finance.

The bridging market is historically weighted towards unregulated bridging, secured on non-owner occupier properties.

However last year the split between unregulated and regulated bridging, when the loan is secured on the owner’s own home, was almost even as regulated bridging made up 49.4 per cent of gross lending.

But lockdown restrictions and the decision by some lenders, such as Together and Roma, to temporarily stop issuing new finance impacted overall lending levels.

Gross lending fell by 38 per cent from £732.7m to £455m year-on-year in 2020.

In quarter one, £112.86m in bridging loans were transacted according to data supplied by ten specialist packagers. Lending decreased to £79.4m in the second quarter as lockdown restrictions continued.

By the third quarter, gross lending had increased to £115.52m and £137.22m in Q4 2020.

 

Rates and LTVs slide

Both interest rates and loan to values (LTV) fell last year.

The average LTV fell to 50.7 per cent in 2020 down from 52.9 per cent in 2019 and 55.6 per cent in 2018.

Average monthly interest rates increased in the first quarter of the year to 0.80 per cent before peaking at 0.85 per cent in Q2.

In the second half of the year there was a sharp drop in pricing with the average monthly rate falling to 0.78 per cent in Q3 and then 0.72 per cent in the fourth quarter – the lowest ever rate recorded by Bridging Trends since its launch in 2015.

Gareth Lewis (pictured), commercial director at MT Finance, said: “After the first lockdown, we saw the re-emergence of some larger lenders and if you combine this with the stamp duty changes, it is no surprise there was a stimulus on rates and regulated bridging in the latter part of the year.”

Chris Whitney, head of specialist lending at Enness, said: “I am surprised the fall in lending in 2020 was so great. The market has always felt busy and Enness did not see such a big drop in volumes.

“Some big names in bridging closed their doors and some still aren’t back as they were. However, most of the short-term lending market either carried on throughout or paused only temporarily as working practices were refined and made fit for purpose under the restrictions we faced.

“The absence of some big names reduced supply and coupled with some restricting LTVs, this has had a marked impact on lending levels. This is also reflected in the fall in average LTVs over the year.”

 

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