"We’ve undoubtedly seen an increase in volume for bridging finance, but I also wonder if the breadth of lending that specialist lenders now provide is a contributory factor."
Bridging loan volumes hit £154.02m in the first quarter of 2018, up almost a third compared to the same period last year to the highest volume recorded since Bridging Trends data launched in 2015.
At £154.02m, the market has almost doubled compared to the £80.47m of lent during Q1 2015. Prior to Q1 2018, volume peaked at £150.07m during the second quarter of 2017.
For the third consecutive quarter, mortgage delays were the most popular reason for obtaining a bridging loan, accounting for 24% of all lending. But for the first time, auction purchases were the second most popular reason for getting a bridging loan at 20% - up from 4% during the same quarter last year.
Average monthly interest rates remained steady at 0.83% for the second consecutive quarter, despite an increase in regulated lending.
Regulated bridging loans increased for the first time since Q1 2017, with the number of regulated loans conducted by contributors increasing to 43.7% in Q1 2018, compared to 42.6% during Q4 2017.
First legal charge lending increased to 83.7% of all loans during Q1 2018, up from 80.3% in the fourth quarter. Meanwhile, second charge loans increased to 16.3% compared to 13.4% during Q1 2017.
Joshua Elash, director of mtf, commented: “It is particularly interesting that pricing has remained stable, despite an increase in regulated lending. This suggests that the recent downward pressure on rates might be easing and in the unregulated space, going the opposite way.
“Also, particularly interesting is the increase in bridging loans for auction purchases, considering the otherwise quiet property market, where transactional volumes have been adversely impacted by recent changes to buy-to-let income tax treatment and exorbitant increases in stamp duty.”
Tomer Aboody, director of mtf, said: “Bridging volume has peaked to its highest level as the product becomes an increasingly mainstream financial tool. This is good news for borrowers that are able to access fast and vast pools of capital to fulfil their short-term funding needs as well as a growing number of investors attracted to the space.”
Chris Whitney, senior broker at Enness Commercial, added: “We’ve undoubtedly seen an increase in volume for bridging finance, but I also wonder if the breadth of lending that specialist lenders now provide is a contributory factor. For example, by definition, bridging loans are a short-term finance facility. However, that definition is now being stretched, with bridging lenders often able to offer facilities for up to two or even three years now.
“Lenders are also offering loans for more varied purposes, like ground-up development. We now even have Sharia-compliant facilities in our toolbox, allowing us to cater for a wider audience. Therefore, the increase in lending perhaps results from there being more things you can ‘do’ with bridging.
“I also think much of the increase in volume is outside of London and the South East, with other areas of the UK playing catch up from previous years. Again, this is because lenders are widening their nets, working across the UK and lending into the Republic of Ireland, Northern Ireland, Scotland, and so on.
“Ultimately, we may soon need to be having a conversation about what constitutes a bridging loan, in order to gain true insight into what the market is doing.”