Buyers’ market for bridging as volumes stable and completion times up

In the three months to September, £181.64 million of short-term lending was transacted, a £3.2 million decrease on the second quarter.

Meanwhile, average completion times crept up by seven days to 51 and average interest rates fell by 0.05 per cent to 0.74 per cent.

A rise in the proportion of regulated loans is reported to be the reason for the drop in average interest rates.

Some 42 per cent of total loans transacted by Bridging Trends’ contributors were regulated- up from 37.5 per cent in Q2.

Almost a quarter (22 per cent) of all lending transacted by the nine firms who contribute to the Bridging Trends survey said the most popular use of a bridging loan was to purchase investment property. It is the third consecutive quarter that purchasing an investment property has been the top reason for taking out bridging finance.

A traditional chain-break was the second most popular use for bridging finance, contributing to 20 per cent of all lending in Q3, up from 18 per cent in Q2 2019.

Bridging loans for business purposes decreased from 12 per cent to 6 per cent in the third quarter.

Demand for second charge loans remained consistent at 18.4 per cent down from 18.8 per cent in Q2 2018.

Average loan to value levels increased by 0.02 per cent in the third quarter to 53.1 per cent.

For the fourth consecutive quarter, the average term of a bridging loan remained at 12 months.

“It is a buyers’ market right now, especially for international buyers who are also taking advantage of the weak pound. This, and suppressed prices due to the political uncertainty, means that many international buyers are picking up assets at over 20 per cent lower than they might have been three years ago,” said Chris Whitney, head of specialist lending at Enness.

“Finance for international investors is widely available but the better loans tend to be with lenders who aren’t particularly quick. Some first-time overseas buyers also take a while to be educated in how the UK purchase and finance system works.

“As it is a buyers’ market many get good purchase prices agreed on the basis they can complete within a relatively short space of time. This means that demand for quick and straightforward short-term loans is very strong,” Enness added.

Gareth Lewis, commercial director at MT Finance, said: “It’s quite clear that the uncertainty of Brexit has had its effect on the London property market, with prices dropping significantly in many boroughs. This has prompted many property investors to use the speed of bridging loans to act quickly on opportunities. With the EU deadline now extended, it would be reasonable that we’ll see the same trends continue throughout the rest of the year.”