Gross Bridging Lending Increases In Q3 2020
There was a big rise in the total gross bridging lending figure in Q3 2020 when compared with Q2 2020. One of the reasons for this may be due to the relaxation by the government on how much stamp duty is payable at the moment. Until 31 March 2021, on residential properties sold for a price of up to £500,000 no stamp duty is payable. This represents a significant saving to many people buying a property.
In the third quarter of 2020, the total gross amount lent by way of bridging loans according to the Bridging Trends infographic that is published by mt finance amounted to £115.53 million. In the second quarter of 2020, the figure was £79.40 million. That is a rise of £36.12 million – a significant increase.
The contributing packagers who arranged the above amount were adapt finance, Brightstar, Capital B Property Finance, Clever Lending, Complety, UK Property Finance, Sirius, impact Specialist Finance, finanta and Enness.
The average monthly interest rate was 0.78% with this being a drop of 0.07% when compared with the second quarter of 2020 when the average monthly interest rate was 0.85%. That is a welcome reduction for borrowers and is perhaps a reflection of the competition within the bridging finance sector.
The average loan to valuation (LTV) rose by 2.9% from 48.8% in the second quarter if 2020 to 51.7% in the third quarter of 2020. This would have been welcome news to lenders as it reduced their exposure to risk of loss.
The average term for a bridging loan remained unchanged at 12 months.
The average time taken to complete on a bridging loan increased from 50 days in the second quarter of 2020 to 52 days in the third quarter of 2020. This is perhaps not a surprise considering the impact of the pandemic.
The main reason why someone arranged a bridging loan in the third quarter of 2020 was to buy an investment property with 22% of advances being for this purpose. In joint second place was regulated finance and chain break both at 17%. Refurbishment (heavy) made up 13% of bridging advances. Next was for business purposes at 10% closely followed by re-bridge at 9%. Auction purchases accounted for 6% of bridging loans with unregulated finance making up 5% of such finance and Other purposes making up 1%.
We will endeavour to continue to provide figures for bridging finance on a quarterly basis.