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Bridging lending up by 50% due to mainstream mortgage delays

  • 20/05/2016
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Bridging lending up by 50% due to mainstream mortgage delays
Delays in mortgage completions contributed to a considerable jump in borrowers accessing bridging finance in the first quarter of the year, prompting calls for mainstream lenders to speed up the application process.

The latest Bridging Trends data found that short-term lending had increased by more than half to £125.35m in Q1 2016, compared to the same period last year. This is a rise of 3.4% on the £121.21m of bridging loans taken out in Q4 2015.

For the fourth consecutive quarter, mortgage delays were the most popular reason for accessing a bridging loan, at 42% of all lending in Q1 2016, dropping slightly from 44% during Q4 2015.

Kit Thompson, director for Bridging Loans at Brightstar said the delays were “shocking” and causes unnecessary costs for borrowers.

“It is always a surprise to me that a mainstream mortgage takes such a long time to complete given that so much of the process is now automated at so many lenders, whereas a bridging loan which is underwritten individually on a case by case basis can be completed in under forty days”, said Thompson.

“While it is full credit to the bridging industry that they can rise to the challenge to ensure that people do not lose the opportunity to buy their new home, it is surely time that mainstream mortgage lenders did likewise.”

Chris Whitney, head of specialist lending at Enness Private Clients, said he was surprised that short-term lending was mostly down to mainstream mortgage delays.

“Perhaps they aren’t ‘delays’ as such and the mortgage market just can’t meet the timing expectations of the borrower where the short term finance solution allows the transaction to happen in a timely manner”, he said.

“Some cases might be genuine ‘delays’ but I suspect that many could well be just a general mismatch of ‘normal mortgage timings’ and the desire or expectation of the borrower.”

Refurbishment was the second most popular reason for getting a bridging loan, contributing to 21% of all lending in the quarter.

Unregulated bridging loans continued to outperform regulated bridging loans, though the number of regulated loans transacted by contributors increased from 35.9% in Q4 2015, to 42.5% in Q1 2016.

Average loan to value levels climbed from 49.9% in Q4 2015, to 52.8% in Q1 2016, and average monthly interest rates hit 0.89%, an increase of 0.02% on the previous quarter.

For the third consecutive quarter, the average term of a bridging loan remained at 10 months.

Bridging Trends is a quarterly publication conducted by bridging lender MTF, and specialist brokers Brightstar Financial, Enness Private Clients, Positive Lending, and SPF.

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