The lender’s bridging trends report found it was moving closer to two months for a typical bridging loan to complete from July to September, something it suggested could be attributed to operational capacity issues.
This issue was also raised in September by Hampshire Trust Bank managing director Charles McDowell who noted turnaround times had become “embarrassingly long”.
Other key findings from the MTF research included an overall increase in bridging lending by 46 per cent in the quarter compared to the previous three months.
Transactions completed by contributors to the survey totalled £116m, up significantly from the £79m completed in Q2, but still down 36 per cent from the pre-Covid-19 level of £181m.
Regulated bridging lending continued to dominate the sector taking 53 per cent of all lending, while average loan to values (LTVs) increased to 51.7 per cent, from 48.8 per cent in Q2.
“This is likely attributed to borrowers turning to bridging finance as mainstream lenders continue to tighten their maximum LTV restrictions,” the report noted.
Encouragingly, the average weighted monthly interest rate in Q3 decreased to 0.78 per cent from 0.85 per cent in Q2 – falling back in line with the 0.75 per cent offered before the Covid-19 outbreak.
Chain break finance growing
The most popular use of a bridging loan was to purchase investment property but regulated refinance and a traditional chain break were the second most popular uses for bridging finance, each contributing to 17 per cent of all lending in Q3.
It is expected that chain break finance will continue to grow until the March stamp duty deadline as the mainstream mortgage market continues to feel the pressure.
MT Finance commercial director Gareth Lewis said: “It has been well publicised that the mortgage market is currently feeling the strain when it comes to delivering acceptable processing turnaround times, which can add to an already stressful experience.
“Luckily, bridging finance is a useful tool for brokers to help unlock a transaction for a client allowing them to meet deadlines.
“Given the stress on a chain, presented by the slow processing times, it is unsurprising to see more clients turning to regulated bridging finance to support their purchases.”
Price war dominating
Enness head of specialist lending Chris Whitney said a further drop in rates were expected as price wars seemed to be dominating the market.
“In the last quarter lenders and key stake holders such as valuers and solicitors had also been able to refine systems and processes that had initially caused problems when lockdown hit in terms of handling volume,” he continued.
“However, I don’t think the increase was purely a supply-led cause. We have seen huge demand from borrowers as well.
“Some perhaps starting previously postponed projects and others looking to put a war chest together in case a pandemic led trauma in the overall economy created opportunities for them.”