Bridging market bounces back from Brexit fears

Bridging loan volumes bounced back during the third quarter after the market was dampened by Brexit uncertainty, according to quarterly monitor Bridging Trends.
Third quarter volume was 54% higher, at £140.49m, than in the second quarter and up 6.6% on the third quarter last year, when volumes reached £131.7m. Contributors said there was strong demand for bridging finance as investors and developers looked for quick and accessible alternatives to traditional bank lending.

Second legal charge lending increased to 19.4% of all loans during Q3, from 16% in Q2, despite several lenders temporarily stopping second charge lending following the Brexit decision.

Bridging Trends is a quarterly survey combining data from bridging lender MT Finance and specialist finance brokers Brightstar Financial, Enness Private Clients, Positive Lending and SPF Short Term Finance.

Chris Borwick, associate director of Savills Private Finance, said the market “has actually turned out to be quite resilient”. “We have certainly seen an increase in most areas with enquiries coming in of all shapes and sizes. Market uncertainty has created opportunities for property investors, but also disruptions in normal residential transactions, so investors are looking to bridging finance in order to capitalise.”

Unregulated bridging loans continued to outstrip regulated bridging loans, though the gap is starting to close, with the number of regulated loans climbing to 49% of all lending. Average monthly interest rates in bridging fell to a low of 0.85% in the third quarter, dropping from 0.88% in the previous quarter and 0.92% in Q3 2015.

Joshua Elash, director of bridging finance for MTF, said the rise in regulated lending, attributed to the implementation of the Mortgage Credit Directive (MCD), was causing delays.

“This larger total percentage of regulated lending appears to have had an adverse impact on the average time a loan takes to complete, and more positively on the average weighted monthly interest rates being charged,” he said.

Kit Thompson, Brightstar’s director of bridging loans, said on average, it is taking three days longer to turn around a bridging loan compared to Q2 this year when the average completion time was 46 days.

“This is largely down to delays with valuations, down-valuations and legal delays, something which the sector (and wider industry as a whole) continues to struggle with. That said, new bridging enquiry levels remain high and there are plenty of funds out there to be deployed. It just takes longer to get these loans through than previously. This could indicate that lenders are becoming slightly more vigilant.”

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