Transition volumes hit highest level since 2018

Bridge loans have returned to the highest levels seen since 2018, according to data from more than a dozen packagers in the industry.

Gross lending by contributors to the survey reached £190.24 million in the third quarter of this year, the highest volume since the fourth quarter of 2018.

Loans were up 30% to £146.52m in the prior quarter and 65% to £115.52m in the third quarter of 2020.

Contributors attributed the growth to strong housing market activity before the stamp duty holiday was phased out.

It represents the highest volume seen since £201.57 million in the last quarter of 2018.

The research combines bridge loans from several specialist finance companies: Adapt Finance, Brightstar Financial, Capital B, Clever Lending, Complete FS, Enness Global, Finanta, Impact Specialist Finance, LDNfinance, Optimum Commercial, Sirius Group and UK Property Finance.

For the second consecutive quarter, buying an investment property was the most popular use for a bridge loan, at 28% of total backer transactions, down from 24% in Q2.

A traditional chain break was the second most popular use at 13%, down from 20% in the second quarter.

Meanwhile, demand for auction funding rose from 4% in the second quarter to 11% in the third quarter.

First-load bridging loan transactions remained unchanged from the previous quarter, accounting for 90% of total market volume in the third quarter.

Regulated bridge loans traded by contributors decreased their market share for the fifth consecutive quarter, falling to 37.7%, compared to 41.6% in the second quarter.

Average LTV jumped to 60.2% from 54.9% in Q2 – this is the highest average LTV on record since Bridging Trends launched in 2015. This shows that borrowers are maximizing liquidity opportunities and take advantage of low interest rates to take on more debt than before. .

The demand for higher LTV products was also a sentiment reflected in data provided by Knowledge Bank, which reported that the top search criteria performed by bridge funding brokers on their system in Q3 was “maximum LTV”.

The average monthly interest rate in the third quarter of 2021 was 0.72%, compared to 0.79% in the second quarter, underlining the high levels of liquidity in a continuously competitive space.

The average duration of a bridge loan in the third quarter fell from 12 months to 11 months. Bridge loan processing times returned to a first-quarter record high of 53 days, from 47 days in the prior quarter.

Stephen Burns, co-founder of Adapt Finance, says: “The most exciting part to read is ‘returns to’ when referring to activity levels.

“It shows how the industry has been affected by the disruption the coronavirus pandemic has ripped through the country, but more so how quickly it has receded, and we are now firing on all cylinders.”

Dale Jannels, managing director of Impact Specialist Finance, said: “These figures show that bridge financing is now a better understood product for many brokers and they are much more confident in recommending this solution to their clients.

“The stamp duty suspension has helped bridge financing gain wider acceptance by traditional industry as a need to meet demands for speed, but investors intending to retrofit have also been at the forefront of recent demands. .”

Chris Whitney, Global Head of Specialty Lending at Enness, said: “Bridging Trends is a great concept and is fantastic for letting the industry know where key indicators are heading and over the years we have seen how micro and macro factors, such as Brexit, have impacted us.

“However, with the news that gross bridge loans from contributors exceed £190m, I wonder how big this market really is in its entirety.

“LTVs are on the rise, with borrowers perhaps taking advantage of ever-cheaper money in light of reports that mortgage rates in general are imminently rising.

“However, with continued competition and even more new entrants into the short-term lending space, it will be interesting to see how it plays out with so many lenders looking to increase their market share in a seemingly highly liquid environment.

“However, at 60% LTV, I think we are still seeing cautious levels of borrowing by people and responsible lending by lenders.

“I was not surprised to see the processing times increase.

“As volumes have increased, I think we’ve seen things take longer, with many lenders struggling to recruit good underwriters and appraisers pushed to the limit.

“With the highest use of funds for investment buying, I think it really shows how much confidence people have in UK property.”

LDNfinance Director Chris Oatway said: “It surprises me that the average LTV is at record highs at just 60%.

“In general, we have seen considerable demand for higher leverage deals at 70% to 75% LTV, where clients keep as much equity in their back pockets for future investments.”

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