You are here: Home - Specialist Lending - Bridging -

Bridging market swings towards regulated lending

by: Heather Greig-Smith
  • 25/04/2017
  • 0
Bridging market swings towards regulated lending
Regulated bridging loans outperformed unregulated bridging loans in the first quarter of 2017, according to figures from a group of lenders and brokers.

The number of regulated loans transacted by contributors increased from 37% in Q4 2016 to 51% in Q1 2017.

The swing towards regulation came as gross bridging lending activity slowed, reaching £118.8m in Q1, down 5.5% on Q4 2016 when it was £125.7m. Lending was also 5.2% lower than in Q1 2016 – when it reached £125.4m.

The data came from Bridging Trends – a quarterly publication conducted by bridging lender MTF, and specialist finance brokers Brightstar Financial, Enness Private Clients, Positive Lending, and SPF Short Term Finance.

The average completion time on a bridging loan application increased by two days to 50.

Joshua Elash, director of MTF, said: “The significant swing towards regulated lending marks an interesting shift which, in turn, we consider has impacted the average time it takes to complete a bridging loan.  Also, whilst the level of regulated activity is up, it is interesting to see rates increase for the first time in five reporting cycles”

Michael Perry, bridging finance broker at Enness Private Clients, said government pressure towards regulation was having an impact. “We have been aware for a while of several non-regulated lenders looking to become regulated so this could well be a demonstration of this.”

Meanwhile, Kit Thompson, director of short-term lending and development at Brightstar Financial, added that the sector was benefiting from the cheapest rates it had ever seen, especially in the regulated arena, and a growing awareness of bridging finance among brokers and borrowers.

He rejected the idea that the drop in lending was the sign of a shrinking market.

“We just had less completions in Q1, which is supported by the increase in the average completion time to 50 days. New business enquiries in Q1 were way up and our business pipeline of post offer cases is larger than ever. It is the delays in cases paying out that I attribute to this slight drop on the previous quarter.”

Thompson said the delays came from a lack of urgency on the borrower side and continued delays with legals. “This seems to be an industry-wide issue and one we are trying to address it by offering a panel of experienced bridging lawyers to borrowers, which we help will reduce the average completion times.”

Pricing in the sector increased for the first time since Q3 2015, with average monthly interest rates rising from 0.78% to 0.83%, despite the lowest ever headline rates being offered.

Perry said the increased interest rate “isn’t the be all and end all”.

He added: “At the end of 2016 we said it would be more beneficial to see greater innovation within the specialist lending sphere, rather than simply keener pricing. The great service versus rates debate rolls on.”

Mortgage delays were again the most popular reason for the use of a bridging loan in Q1 2017, at 31% of all lending, dropping from 35% during Q4 2016. Refurbishment was the second most popular reason (23%).

First charge lending for the quarter rose to 86.6%, from 82.6% during Q4 2016. Second charge transactions dropped slightly from 17.4% in the previous quarter, to 13.4%.

Average loan-to-value levels dropped to 46.2% in Q1 2017 whilst the average monthly interest rates were up to 0.83%, representing an increase of 0.05% on the previous quarter.

Earlier this month, bridging brokers raised concerns that the market was overcrowded with lenders and that they were not doing enough to differentiate themselves.

There are 0 Comment(s)

You may also be interested in

  • RT @OTJournalist: Tony Salentino of @completefs1993 has been a major character of the packager and specialist mortgage market for two decad…

Read previous post:
Mint Bridging makes play for Funding Circle business

Mint Bridging has seen a rise in development lending demand after Funding Circle’s decision to exit the market, it has...

Close