Lender competition pulls bridging rates to historical lows
A total of £178.4 million of bridging loans were transacted by contributors in the second quarter of this year, recording 22% annual growth from £146.5 million in Q2 2021 and a 14% increase from £156.8 million in the previous quarter.
According to the latest Bridging Trends data, contributor gross bridging lending increased for the third consecutive quarter as bridging rates continued to fall to historic lows.
Lender competition continued to drive bridging rates down to record lows in Q2, with the average monthly interest rate falling to 0.69%, down from the previous record low of 0.71% reported in Q1. Loan-to-values edged up slightly from 54.5% in Q1 to 56.1% in Q2.
Purchasing an investment property remained the most popular use of a bridging loan in Q2 at 24% of total contributor transactions, falling slightly from 26% in the previous quarter. The second most popular use was to chain break, accounting for 21% of total transactions.
Second charge loans accounted for an average of 16% of total market volume in Q2, up from 12% in Q1. The average term of a bridging loan remained at 12 months.
Read more: “In bridging, speed is of the essence”.
“It’s no surprise to see 83% of Q2’s bridging loans being on a first-charge basis as the lending options for stand-alone second charges are fewer than they once were,” Stephen Watts, bridging and development finance specialist at Brightstar, commented. “It is also not surprising to see a 14% rise in bridging finance activity.
“The demand for property currently outweighs the number of suitable properties for sale to homebuyers and investors, therefore, bridging finance is being increasingly sought to enable buyers to put themselves ahead of their competition.
“With recent statistics confirming, on average, that there are up to 29 potential buyers for each property on the market for sale, it’s not a shock to see such an increase in requirement for fast, short-term bridging finance.”
Andre Bartlett, director at Capital B Property Finance, was also not surprised to see bridging loan volumes increase.
“As always, the bridging trends data shows exactly what is happening in the industry,” he remarked. “There may now be some pressure on lenders to increase pricing, but we must remember rates are at their lowest and bridging still represents excellent value for the right client.
“Lenders seem busier than ever, and completion timescales are slipping. I feel this is a combination of staff shortages and the uplift in business. The industry is still well placed to provide much-needed assistance to clients over, what could be, some interesting times ahead.”
Gareth Lewis, commercial director at MT Finance, pointed out that the bridging market has been fiercely competitive in recent times which has led to rate reductions, and bespoke pricing being offered. He, however, doubts that this trend will continue in the coming months.
“Base rate increases and swap rate volatility have been ever present in 2022, but their impact has yet to be truly seen in the bridging sector, as it has throughout the mortgage market,” Lewis noted. “As pressure continues to build and funding costs increase, I expect to see the start of movement in our sector in the coming months.”
Bridging Trends provides quarterly statistics collected by short-term finance lender MT Finance as a method for monitoring the latest trends in short-term bridging finance lending in the UK. Contributors include Adapt Finance, Brightstar, Capital B Property Finance, Clever Lending, Clifton Private Finance, Enness, Complete FS, Impact Specialist Finance, Knowledge Bank, LDNfinance, Optimum Commercial, Sirius, and UK Property Finance.