According to Bridging Trends Q1 survey, 20 per cent of all bridging loans taken out in the three months to March were to allow buyers to break a property chain, down from 23 per cent in Q4 2020.
Purchasing an investment property was the second most popular use for bridging finance in Q1, falling to 19 per cent of all lending, from 21 per cent in the previous quarter.
Meanwhile, demand for bridging loans for business purposes increased from 10 to 14 per cent in the first quarter of the year, as businesses prepared for lockdown restrictions easing.
Total advances from lenders contributing to the survey increased to £144.5m, a five per cent rise on the previous quarter when lending levels reached £137.2m. This was largely attributed to more lenders contributing to the Bridging Trends data.
Regulated bridging loans transacted by contributors remained unchanged from the previous quarter, at 48 per cent of total lending. Meanwhile, second charge transactions remained at 22 per cent of market share in Q1 2021.
The average weighted monthly interest rate in Q1 was 0.74 per cent. This was marginally higher (0.02 per cent) than in Q4 2020, but still cheaper than rates of 0.80 per cent offered before the Covid-19 outbreak.
The average loan-to-value rose to 55.2 per cent from 51.3 per cent in the previous quarter. The average term of a bridging loan climbed by one month to 12 months, falling in line with the same quarter in 2020.
Completion times increased to 53 days on average in the first quarter of the year, up from 50 days in Q4 2020. This is the highest figure recorded since Bridging Trends launched in 2015.
The top criteria search made by bridging finance brokers during Q1 was maximum LTV, according to data supplied by Knowledge Bank. This was followed by searches for regulated bridging and minimum loan amount.
Dale Jannels, managing director of Impact Specialist Finance, said: “I’m not surprised that chain break finance is top of the reasons to use bridging loans.
“Property transactions are booming and we’re seeing a large number of solicitors trying to exchange and complete on the same day.
“This inevitably will result in people pulling out of purchases late on and therefore clients need a short-term loan to fill the gap their buyer left behind. This brings a great opportunity to the sector, especially with the addition of the next stamp duty deadline looming on the horizon.”