Data from the report revealed contributor gross lending reached £118.79 million in the first quarter of 2017, compared to £125.66 million in the last quarter of 2016 - and the figure is also lower than the corresponding quarter last year, where lending was £125.35m.
Bridging Trends is a quarterly publication conducted by bridging lender MTF and specialist finance brokers Brightstar Financial, Enness Private Clients, Positive Lending, and SPF Short Term Finance, designed to monitor the general trends in the bridging finance market.
Regulated bridging loans outperformed unregulated bridging loans for the first time since Bridging Trends was launched in April 2015. The number of regulated loans transacted by contributors increased from 37.3% in Q4 2016 to 50.7% in Q1 2017.
Mortgage delays were again the most popular reason for the use of a bridging loan in Q1 2017 at 31% of all lending, dropping from 35% during Q4 2016. Refurbishment was again the second most popular reason for getting a bridging loan contributing to 23% of all lending.
First charge lending for the quarter rose to 86.6%, from 82.6% during Q4 2016. Second charge transactions dropped slightly from 17.4% in the previous quarter, to 13.4%. Average LTV levels dropped to 46.2% in Q1 2017 whilst the average monthly interest rates were up to 0.83%, representing an increase of 0.05% on the previous quarter.
The average completion time on a bridging loan application increased by 2 days to 50.
The average term of a bridging loan hit a new high at 12 months.
Joshua Elash, director of bridging finance lender MTF, said:
“The significant swing towards regulated lending marks an interesting shift which, in turn, we consider has impacted the average time it takes to complete a bridging loan. Also, whilst the level of regulated activity is up it is interesting to see rates increase for the first time in 5 reporting cycles.
“Whilst it is too early in the year to draw any firm conclusions from this first quarter of data, it is these key parameters we are most keenly observing as we move forward in the year.”
Michael Perry, Bridging Finance Broker at Enness Private Clients, said:
“Q1 2017 appears to have experienced somewhat of a hangover from the financial uncertainty of 2016, with gross lending down to £118.79million from £125.62million since Q4 2016. Additionally, we have seen average monthly interest rates rise from 0.78% to 0.83%, despite the lowest ever headline rates being offered.
“In terms of the increased interest rate, we have always said it isn’t the be all and end all; at the end of 2016 we said it would be more beneficial to see greater innovation within the specialist lending sphere, rather than simply keener pricing. The great service vs. rates debate rolls on.
“As predicted, it’s no surprise to see the number of regulated loans among specialist lenders increasing in Q1 with various government changes putting pressure on the market to move into the regulated sector. We have been aware for a while of several non-regulated lenders looking to become regulated so this could well be a demonstration of this.
“Average loan to value remains at modest levels, indicating that the industry is continuing its responsible lending policies.
“Finally, the most common reasons for bridging loans being taken – refurbishment and mortgage delays – is certainly something evidenced by our client base as people wish to make a good return on an investment or take advantage of the current market by making an onward purchase.”
Kit Thompson, Director of Short Term Lending & Development at Brightstar Financial, said:
“Commenting on the first quarter of 2017, the slight drop in lending I do not see as significant and not a sign of a shrinking market. We just had less completions in Q1, which is supported by the increase in the average completion time to 50 days.
“New business enquiries in Q1 were way-up and our business pipe-line of post offer cases is larger than ever. It is the delays in cases paying out that I attribute to this slight drop on the previous quarter.
“The delays seem to be twofold; a lack of urgency on the borrower’s part to complete in a hurry and continued delays with legals where borrower’s solicitors tend to drag their heels and take too long to deal with the legals. This seems to be an industry wide issue and one we are trying to address it by offering a panel of experienced bridging lawyers to borrowers, which we help will reduce the average completion times.
“The stand-out stat for me is that the percentage of FCA regulated loans out-stripped non-regulated loans for the first time. I would attribute this to a combination of the cheapest rates the sector has ever seen (especially in the regulated arena), coupled with an increased awareness of bridging finance as a possible funding solution amongst brokers and borrowers.
“I predict a much stronger Q2 for completed bridging loans and expect there to be a more even split of reg V non-reg loans moving forward, coupled with increased demand for refurbishment finance.”
