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Bridging LTVs rise as new lenders make their mark

  • 24/01/2019
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Bridging LTVs rise as new lenders make their mark
New bridging lenders made their mark in 2018 with average loan to values (LTVs) rising while typical monthly interest rates dipped slightly, according to MTF’s Bridging Trends report.


Average LTVs increased to an average of 55%, from 47% in 2017, and 49% in 2016.

“This could be attributed to higher LTVs being made available by new entrants in the space,” the report said.

Interest rates continued to fall year on year, with monthly rates in 2018 averaging 0.81%, lower than in 2017 (0.83%) and 2016 (0.85%).

The report also noted that bridging loans for mortgage delays fell in every quarter in 2018.

Instead, it suggested borrowers were opting for bridging loans to improve properties and bolster yields with Brexit uncertainty and legislation making it tougher to purchase new properties.

As a result, regulated bridging declined during the year to an average of 36% of cases completed – down from 46% in 2017, 44% in 2016, and in-line with the 37% in 2015.

The split between first and second charge bridging loans remained consistent throughout 2018, with first charge accounting for 83% of the market in all four quarters and seconds at 17% – the same as 2017.


Refurbishment and business needs

The report is created with data from lender MT Finance and broker firms Brightstar Financial, Clever Lending, Complete FS, Enness, Positive Lending, Pure Commercial Finance, and Y3S.

Four of these broker firms were new additions to the report in 2018, explaining the increase in transactions completed by contributors rising £232.8m to hit £766.9m.

The time taken for cases to be completed also edged up to 45 days in 2018 from 43 days in 2017, but this remained on a par with 2016.

Funding property refurbishments was the most popular reason for obtaining bridging finance, with the average proportion of loans advanced for property refurbishments increasing from 23% in 2017, to 28% in 2018.

However, demand for bridging loans taken out for business purposes also increased from 12% in 2017 to 14% in 2018.


Second charges to grow

MT Finance commercial director Gareth Lewis noted that investing in property to add value and improve returns was evidently a long-term trend throughout 2018.

“With Brexit still uncertain, the first quarter’s data will be interesting reading, but I expect demand for bridging finance will remain strong and the product will continue to provide vital support for property investors,” he said.

Complete FS director Phil Jay echoed concerns related to Brexit but said he was confident lenders in the sector compensate for any likely loss of liquidity, if funding tightened.

“Our lending was up 12% over the year and as we go into 2019, we will be looking to ensure that our lending panel reflects the experience and longevity needed to see out any further blips that might come our way,” he said.

Y3S bridging and commercial director Nathan Raffour added that the broker’s regulated business was higher than the report average with increasing demand for refinance for bridging.

Enness Global Mortgages head of specialist lending Chris Whitney suggested second charges may spike this year with some first charge holders having Brexit worries coupled with downward pricing pressure.

“While the average term came down, I think many bridging lenders are offering much longer terms now with a demand for it as cost of funds becomes more and more cost effective so I don’t see that as a trend that will continue.”


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