The latest data released by Bridging Trends shows that the third quarter of this year has seen the highest volume of bridging lending since 2018, reaching over £190 million.
This is a massive jump from the previous figure of £146 million recorded in the second quarter of 2021 and a 65% increase when compared to last year (£115.52 million).
It is thought that the reason for this increase can be mainly attributed to the strong property market seen before the stamp duty holiday was tapered and ultimately stopped.
The most popular use of bridging finance for the second consecutive quarter was for the purchase of property, with 28% of total contributor transactions (up from 24%), followed by a lower figure of 13% for chain break (down from 20% in the previous quarter).
There was also a surge in demand for auction finance, from 4% in Q2 to 11% in Q3.
First-charge bridging loan finance, which accounted for 90% of the total market volume, remains unchanged.
There was, however, a drop in regulated bridging loan transactions for the fifth consecutive time, with figures falling from 41.6% in quarter 2 to 37.7% in quarter 3.
The data released also showed an increase in average LTV from 54.9% in Q2 to 60.2% in Q3, this being the highest since the launch of Bridging Tends in 2015. This rise indicates that borrowers are taking advantage of liquidity opportunities and the low rates available to them.
Co-founder of Adapt Finance, Stephen Burns, commented: “The most exciting part to read is ‘returns to’ when referring to activity levels.”
“It shows the industry was affected by the disruption the coronavirus pandemic put the country through, but more so, how it has pulled back quickly, and we are now firing on all cylinders!”
Managing director at Impact Specialist Finance, Dale Jannels, added: “These figures show that bridging finance is now a better-understood product for many brokers, and they have much more confidence in recommending this solution to their customers.”
“The stamp duty holiday allows bridging finance to be more widely accepted by the mainstream industry as a need to meet speed demands, but investors with the intention to renovate have also been at the forefront of recent requests.”
Director at LDN Finance, Chris Oatway, stated his surprise that the LTV was as low as 60% on average, stating that they had seen an increased demand for higher leverage deals at 70%–75% LTV.
“Regulated transactions accounting for over a third of the market stand out when you consider the limited number of bridging lenders who are able to transact regulated business and show there’s opportunity there for more lenders to enter this market,” he added.
Head of specialist lending at Enness Global, Chris Whitney, said: “With the news that contributor gross bridging loans are over £190 million, it makes me wonder how big this market really is in its entirety.
LTVs are up, with borrowers possibly taking advantage of increasingly cheaper money in the light of reports that mortgage rates, in general, are heading upward imminently.
However, with continuing competition and even more new entrants in the short-term lending space, it will be interesting to see how that pans out with so many lenders looking to increase market share in a seemingly very liquid environment.”
“At 60% LTV, I think we are still seeing prudent levels of borrowing by people and responsible lending from the funders.”
He also added that he wasn’t at all shocked by the increase in processing times, stating that it would be a direct result of increased volumes, valuers being stretched, and lenders finding it difficult to recruit good underwriting.
“With the highest use of funds being for investment purchases, I think it really shows how much confidence people have in UK real estate.”