Large Reduction In Bridging Finance In 2020
It is probably not a surprise to read that the amount lent by way of bridging finance in 2020 dropped significantly here in the UK when comparing the figures with 2019 according to statistics published by Bridging Trends. So, let us look at the figures in Bridging Trends infographic in a little more detail.
The amount of bridging lending by the contributing packagers that were included in the Bridging Trends infographic amounted to £455 million in 2020. This was a fall of £277.7 million in comparison to the previous year that equates to a drop of 37.9% and we are sure that you will agree this is a big fall. A major factor that no doubt had an effect was the COVID-19 pandemic.
The average term for bridging finance in 2020 was 12 months that, to some people, may seem quite a long time when you consider that such finance is normally of a short-term nature.
It is interesting to see that the average loan to valuation in 2020 was 50.7% whereas in 2019 it was 52.9%. This statistic will no doubt please lenders as it means that there borrowing is more secure assuming that they took a charge over the property/land that they were advancing funds for.
In the 4th quarter of 2020 the average monthly interest rate was 0.72% whereas in the 2nd quarter of last year it was 0.85%. This statistic may please some borrowers who took on such finance in the last quarter of 2020.
If you look at the purpose of bridging finance in 2020 you will find that investment purchase was the main reason someone took out a bridging loan with 22% of people borrowing for that purpose. Next was chain breaking at 17%. In 3rd place was regulated finance at 12%. Close behind were refurbishment (heavy) and business purposes – both at 11%. Next was re-bridging at 10%. After that it was unregulated finance at 8%, followed by auction purchase at 5% and in last place was other at 4%.
The average time to complete on a bridging loan in 2020 was 50 days compared to 47 days in 2019. This statistic may have caused some concern amongst a number of borrowers as some may have hoped that the transaction could have been completed quicker.
Those taking part in the bridging finance infographic were mt finance, adapt, Brightstar, CapitalB, Clever Lending, Complety, Enness, finanta, impact, Sirius and UK Property Finance.