This has been the case for the first three quarters of the year but in Q3 bridging finance for property development nudged down to 22% from 25% in Q2.
A traditional chain-break was once again the second most popular use for bridging finance, contributing to 20% of all lending in Q3, up from 18% in Q2 2019.
Bridging loans for business purposes fell from 12% to 6% in the third quarter.
The Bridging Trends figures are derived from lender MT Finance and specialist finance brokers Brightstar Financial, Capital B, Clever Lending, Complete FS, Enness, Impact Specialist Finance, Positive Lending, Y3S and UK Property Finance.
Bridging loan growth weakened in the third quarter, with transactions by the contributors to Bridging Trends hitting £181.64 million, down by £3.2 million on the previous quarter.
The number of regulated bridging loans within the report rose to 42% in Q3, up from 37.5% in Q2. There was a lower average monthly interest rate in the third quarter (0.74%), a decrease of 0.05% on the previous quarter.
Demand for second charge loans remained consistent at 18.4% in Q3, with average LTV levels at 53.1%.
For the fourth consecutive quarter, the average term of a bridging loan remained at 12 months. The average completion time on a bridging loan application in the third quarter increased by seven days to 51.
Gareth Lewis, commercial director at MT Finance, said: “Bridging loan activity for the third quarter remained stable, coupled with the most popular uses, is a good indication of strong demand from borrowers seeking to purchase property fast while prices are low, ahead of Brexit’s conclusion.
“It’s quite clear that the uncertainty of Brexit has had its effect on the London property market, with prices dropping significantly in many boroughs. This has prompted many property investors to utilise the speed of bridging loans to act quickly on opportunities.
“With the EU deadline now extended, it would be reasonable that we’ll see the same trends continue throughout the rest of the year.”
Andre Bartlett, director of Capital B Property Finance, commented: “We are still seeing strong demand for regulated loans for chain breaking etc for good clients, at low LTVs. The appetite for lenders for these types of deals remains healthy and rates continue to be consistently low and the competition is still fierce.
“The downside is average completion times for loans is heading in the wrong direction, but that may be due to matters outside of lenders’ hands. I would love to see the average completion time get down to below 40 days.”
Chris Whitney, head of specialist lending at Enness, added: “It is a buyers’ market right now, especially for international buyers who are also taking advantage of the weak pound.
“This, and suppressed prices due to the political uncertainty, means that many international buyers are picking up assets at over 20% lower than they might have been three years ago.”
By Joanne Atkin
Source: Mortgage Finance Gazette