Bridge loans jump 14% to £178m in second quarter: MT Finance

Loans in the relay business rose 14% in the second quarter to £178.4m from the first three months of the year, according to MT Finance, as a ‘continued shortage of stock means there there has been no letting up in terms of pressure on buyers”.

The second quarter figure is up 22% from the same period a year ago, according to the short-term lender’s quarterly Bridging Trends report. It is also the third consecutive quarter of growth.

Loans to buy investment property remained the most popular use of bridge financing in the quarter – at 24% of total transactions – compared to 26% in the previous quarter. The second most popular use was ‘chain break’, accounting for 21% of total transactions in Q2.

High rates of market activity have been demonstrated by “several [bridging loan] buyers competing for the same property in some cases,” the report said.

He adds: “Those who are not cash buyers are putting themselves ahead of the competition by turning to bridge financing for a quick injection of cash, highlighted by the increase in bridge loans for auction purchases, which have doubled from 2% in the first quarter to 4% in the second quarter.

But regulated refinancing saw the biggest change in demand over the period, rising to 10% of total transactions from 5% in the prior quarter.

The study says: “This shift may indicate that more owners looked to upgrade their properties in the second quarter, rather than move out and compete in a busy market.”

He adds that “competition from lenders” continued to push transition rates down to record lows in the second quarter, with the average monthly interest rate falling to 0.69%, down from the previous record low of 0. 71% recorded in the first three months of the year. .

Loan-to-value ratios rose slightly from 54.5% in the first three months to 56.1% in the second quarter.

Average loan execution times rose to 57 days from 53 days in the prior quarter as appraisers and transfer companies saw “an increase in demand for their services from buyers working to tight deadlines.”

The split between regulated and unregulated bridging loans remained consistent with the previous quarter, with regulated loans accounting for 43.3% of the market, down from 43.9% in the first three months.

The main search criteria performed by bridge finance brokers during the period remained unchanged from the previous quarter – ‘regulated bridge’ was first, followed by ‘minimum loan size’, according to data provided by Knowledge Bank.

Second lien loans averaged 16% of total market volume during the period, compared to 12% in the first quarter. The average duration of a bridging loan remained at 12 months.

MT Finance Commercial Director Gareth Lewis says: “The bridge market has been extremely competitive of late, which has led to rate cuts and bespoke pricing.

“This trend has allowed lenders to create a competitive advantage to try to gain market share. However, will we continue to see this in the months to come? I doubt.

“Base rate increases and swap rate volatility have been ubiquitous in 2022, but their impact has not yet really been seen in the bridging industry, as it is in the broader mortgage market.

“As pressure continues to mount and funding costs rise, I expect to see the beginning of movement in our industry in the months ahead.”

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