8:08 AM, 2nd November 2022, About 11 months ago
A total of £214.7 million in bridging loans was transacted by contributors during the third quarter – the third consecutive quarterly increase and a 20% rise on Q2, research reveals.
The latest Bridging Trends figures show this is the highest contributor lending amount since they began recording data in 2015.
Preventing a chain break was the most popular use of a bridging loan in Q3 in 22% of total transactions, up from 21% in Q2.
Purchasing an investment property – previously the most popular use of bridging finance for the five previous quarters – dropped by a third, from 24 to 16%.
This is an all-time low and could be due to investors exercising caution amid an unpredictable economic climate.
Meanwhile, bridging loans for business purposes nearly doubled, soaring from 6% in Q2 to 11% in Q3. Auction finance also saw a jump in demand, rising from 5% in Q2 to 8% in Q3.
The average monthly interest rate increased for the first time this year to 0.73% in Q3, up from the record low reported in the previous quarter (0.69%) as the cost of borrowing increased across the financial services industry.
The average loan-to-value level also increased in Q3 – to 59.6%, up from 56.2% in Q2.
Regulated bridging remained in high demand, taking 45.2% of market share, up from 43.3% in Q2 – the highest percentage in regulated bridging transactions since Q1 2021.
Pressure on industry professionals continued into Q3 as demand soared – highlighted by the average completion time increasing to 60 days in Q3, from 57 days in the previous quarter.
According to data supplied by Knowledge Bank, the top criteria search by bridging finance brokers in Q3 was ‘expatriates’, followed by ‘family gifted deposit’ and then ‘flats – not new build’.
Sam O’Neill, the head of bridging at Clifton Private Finance, said: “The total gross lending figure will be an interesting benchmark for the next quarter given the current uncertainty of 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 added: “I anticipate investment purchases to increase in the next few months.
“Current bridging loans nearing their term’s end are subject to more stringent criteria on mortgages and an uncertain buying/selling market.
Stephen Watts, a bridging and development finance specialist at Brightstar, said: “Following the base rate rises we’ve seen throughout this year and mortgage interest rates increasing across the industry, it’s no surprise that chain-break bridging is the biggest use of funds for the quarter.
“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.”
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