Bridging Lending Bounces Back After Lockdown
Reports from bridging finance resource, Bridging Trends, have shown a 46% increase in volume for bridging loans in Q3 this year.
As Covid-19 lockdown restrictions have eased, lenders have continued to fund and complete deals, something that was more or less on hold during the 3-month lockdown break.
Contributors of Bridging Trends including MT Finance, Sirius Group, Enness and more, totalled £115.52 million in Q3 of 2020. Overall volumes were down compared to this time last year (£180.94 million) but they had risen significantly from the £79.4 million transacted in Q2.
Regulated bridging loans, which are offered against an individual’s primary residence, was accountable for 53% of all lending, with 47% dedicated to unregulated transactions.
Regulated bridging lending continued to dominate the sector in Q3 at an average of 53 per cent of all lending, compared to 47 per cent of unregulated transactions, otherwise known as non status lending.
The average loan term was around 12 months, for the 8th consecutive quarter, even though products are available for as long as 18 or 24 months.
The average completion time according to the report was 52 days, compared to 50 days in the previous quarter, likely as a result of staff, resources and other limitations when getting valuations or feedback from solicitors.
Bridging loans are considered to be a type of specialist or ‘non bank’ finance – and are often used to complete on properties with a tight deadline. Whilst a mortgage may take several months to be processed and approved, bridging lenders highlight the speed of transactions as their main selling point, with some deals able to be funded within 2 to 4 weeks.
The products are mostly used by investors and developers who are looking to avoid property chains and purchase a property quickly before someone else does. An exit plan is key to being approved, whether it is renting out the property, selling it for a higher price or refinancing it under new terms.
A spokesperson from MT Finance said in a blog post:
“The stamp duty holiday and rising house prices has ensured that the market remains busy and 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.”