bridging lending
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The bridging sector continued its recent growth with a 10% uplift last year as the regulated market continued to approach parity with the unregulated side.

According to the Bridging Trends report, bridging loan volume rose to £534.1m in 2017, up from £482.6m in 2016 and £432.5m in 2015.

The second and third quarters of the year were the strongest – with £150.7m completed in Q2 the highest overall.

Regulated activity rose to 46% of the market, up from 44% in 2016 and 36.6% in 2015, with regulated activity outperforming unregulated loans for the first time in Q1.

Average loan-to-value (LTV) levels dropped to 46.6% in 2017, down from 49% in 2016, while average monthly interest rates remained consistent throughout the year at 0.83%, down from 0.85% in 2016 and 0.91% in 2015.

Demand for bridging loans for refurbishments and auction purchases rose, although mortgage delays were again the most popular reason at 29% of all lending down from 34% of activity.

The data is collected from bridging lender MTF and brokers Brightstar Financial, Enness, Positive Lending and SPF Short Term Finance (SPF), to offer a general snapshot of the UK bridging finance industry as a whole.

The trend towards bridging for financing property refurbishment drew particular attention.

Popular route

Enness Commercial senior broker Chris Whitney (pictured) noted that this was a popular route to avoid hefty stamp duty costs and stagnation in the London property market.

“Many more clients have been buying cheaper or outdated properties and using second charge bridging finance to update them before refinancing onto a residential product,” he said.

“Likewise, we’ve seen numerous clients look to raise money against their properties who do not want to refinance altogether. As such, they’re using regulated bridges as second charges against their property, in order to keep their attractive first charge mortgage while securing the extra funds they need.”

Brightstar director of short term lending and development Kit Thompson echoed this, adding: “Our business has seen a large increase in bridging for property refurbishment, with an increase in Permitted Development Right (PDR) schemes and change of use projects.

“Almost all of our non-regulated bridging loans here at Brightstar involved some element of refurbishment, whether just light refurbs or those projects involving change of use and planning consent.”

Thompson noted, however, that regulated bridging deals Brightstar conducted rarely involved refurbishment.

Trends to watch

MTF director Joshua Elash added the data showed bridging finance was increasingly a mainstream financial solution.

“It is interesting to note what appears to be a direct correlation between the data reported and the macro-economic and regulatory changes which have impacted upon the market.

“We have, for example, in this annual reporting cycle, seen regulated bridging finance lending outstrip unregulated bridging finance for the first time. This follows on from the implementation of the mortgage credit directive and the consequential introduction of a new class of regulated consumer buy to let lending.

“Equally we are interested to note that again for the first time since reporting began, refurbishment to existing investment property was the most popular reason for borrowing during Q2 of last year.

“As we look ahead to the year 2018 we are interested to see how these two trends in particular pan out,” he added.

Source: Mortgage Solutions

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