Bridging lending rises for third quarter in a row to £214.7m

According to the latest Bridging Trends report by MT Finance, this is the highest lending figure since the report was launched in 2015.

The most popular purpose for bridging was chain break at 22 per cent, followed by investment purchase at 16 per cent and business purposes or heavy refurbishment at 11 per cent apiece.

Investment purchase and business purpose reported the largest changes compared the previous quarter with the former dropping by eight per cent whilst the latter grew by five per cent.

On the investment purchase side, the report said that this was an “all-time low” and could be due to “investors exercising caution amid an unpredictable economic climate”.

The average monthly rate grew to 0.73 per cent per month in Q3, compared to 0.69 per cent in Q2 which was a record low. This is due to increasing costs of borrowing across the industry.

The average loan to value came to 59.6 per cent in Q3, which is up from 56.2 per cent in Q2, and the average term for a deal stayed static at 12 months.

The average completion timeframe was 60 days, a rise from 57 days in the previous quarter.

More than half, 54.8 per cent, of transactions were regulated, and 45.2 per cent were unregulated. This is a flip on the previous quarter when 56.7 per cent was unregulated and 43.3 per cent was regulated.

The majority of transactions, 86.2 per cent, were first changes, with the remainder falling into the second charge camp.

Gareth Lewis, commercial director at MT Finance, said: “Considering the volumes we have seen in Q3, bridging finance clearly continues to be a useful tool for homeowners and investors alike.

“What has been interesting is the drop-off in bridging being utilised for investment purchases, which is likely due to buyers taking stock of the current market. While it’s too early for us to really feel the impact of September’s mini Budget, I expect this will be more visible in Q4.”

He added: “As predicted in Q2, interest rates have started to slowly rise to 0.73 per cent but it is worth noting they are virtually on a par with Q3 in 2021 (0.72 per cent). I would not be surprised if interest rates continue to rise, and investors remain cautious.”

Investment purchases and rebridging expected to grow in popularity

Sam O’Neill, head of bridging at Clifton Private Finance, said that the total gross lending figure would be an “interesting benchmark” for the following quarter due to uncertainty in the market.

“With uncertainty comes opportunity, and we are already seeing investors looking to capitalise on under market value transactions caused by panic-selling vendors,” he noted.

O’Neill continued that he expected investment purchases to grow in the next few months and he would be intrigued to see rebridging figures in next quarter’s statistics.

“Current bridging loans nearing their term’s end are subject to more stringent criteria on mortgages and an uncertain buying/selling market. Will more lenders who don’t currently consider rebridging see this as an opportunity? Or a necessity to keep pace with other lenders and the demands of the market?” he said.

Stephen Watts, bridging and development finance specialist at Brightstar, continued that with the base rate rises and mortgage rate increases across bridging, it was “no surprise” chain break was the most popular use of bridging.

He added: “Borrowers that have had mortgage products withdrawn on them with little or no notice or have lost their sale due to their buyers no longer fitting mortgage affordability criteria, would then turn to short-term funding solutions to ensure their purchase can still go through as planned.

“It will be interesting to see how this impacts on next quarter’s data.”