Bridging lending saw a 27.3% fall in deal values between April and June, when it wrote loans worth £91.1m, compared with £125.4m in the three months prior, according to the latest quarterly Bridging Trends monitor.
This represented an 8% fall on the same period last year, when the industry sealed £99.1m in bridging deals, the survey found. It said demand for bridging loans had tapered ahead of the Brexit vote in late June.
Bridging Trends is a quarterly survey combining data from bridging lender MT Finance and specialist finance brokers Brightstar Financial, Enness Private Clients, Positive Lending and SPF Short Term Finance.
The survey followed a broker sentiment study published by MT Finance in July, which suggested the market had not been impacted by MCD. Almost two thirds of brokers reported a rise in loan volumes in the second quarter of the year, while about 15% of those surveyed reported a drop in business, the survey had said.
A cooling market
Bridging Trends said second charge bridging also saw a dip in volumes in the quarter, mainly due to the effects of the MCD and changes to Stamp Duty, which had caused a rush to complete deals in the first quarter, followed by a cooling period after.
Figures published by the Association of Short Term Lenders (ASTL) for Q1 showed bridging had performed particularly well in the run up to March, suggesting a rush for completions. Although ASTL recorded a 9% drop in the value of applications in Q1 2016 compared with the December quarter, this was 10% less of a drop than in the same period in 2015, when values fell 19%.
Brightstar Financial director of bridging and development Kit Thompson, said he was not surprised bridging lending was down for Q2 in the lead up to the referendum.
“We have to bear in mind that March was a bumper month for the bridging industry as borrowers wanted to beat the stamp-duty changes, followed by inevitably quieter months in April and May,” he said.
The survey showed average loan-to-value (LTV) levels also fell from 52.8% to 47.4% in the first half of the year.
Cautious and conservative approach
Perhaps most strikingly, the average completion time on a bridging loan application took 46 days in the period, up from 37 days in Q1. This was because lenders took a more cautious and conservative approach to lending amid the political and regulatory turmoil, the survey said.
Inness head of specialist lending Chris Whitney suggested the figures could be down to short-term funders providing facilities for development, which typically takes longer than purchases.
Similarly, mortgage delays were the most popular reason for borrowers accessing a bridging loan in the quarter, at 30% of all lending. This was followed by refurbishment at 22% and business purposes at 20%.
Unregulated bridging loans attributed for 51.5% of all contributor lending in Q2, although the number of regulated loans hit a new high of 48.4% since Bridging Trends launched, it said.
MT Finance director Joshua Elash said: “Overall, the sector is in good health. Cheaper rates of interest and lower loan to values continue to show that the bridging market is behaving responsibly.”