2016 Bridging Trends revealed
Bridging loan volume rose £50.1m (11.5%) to £482.61m in 2016 compared to £432.51m in 2015, according to the latest Bridging Trends data.
Volume rose overall despite a volatile year that saw issuance levels rise and fall against a backdrop of major geopolitical and economic events including Brexit and Trump’s US election win.
The year kicked off to a strong start with £125.35m of bridging loans completed by Bridging Trends contributors in Q1, before cooling off during Q2 to £91.11m, due to uncertainty in the run up to the referendum. Volume picked up again in Q3 rising to £140.49m, before dropping in the fourth quarter to £125.66m.
Volume during the first, second and fourth quarters of 2016 all exceeded levels compared to the same quarters last year, highlighting a strong increase in demand for bridging finance, the data shows.
Bridging Trends is a quarterly publication conducted by bridging lender MTF and a number of the industry’s specialist finance brokers: Brightstar Financial, Enness Private Clients, Positive Lending and SPF Short Term Finance, to offer a general snapshot of the UK bridging loan industry as a whole.
The split between 1st and 2nd legal charge loans remained fairly consistent throughout 2016, with first charge loans accounting for over 82% of the market in all four quarters.
A significant percentage of bridging loan activity was unregulated in 2016 at an average of 55.5% of all deals, although regulated business increased to 44.4% of all deals in 2016 compared to 36.5% in 2015, due to changes in regulation and the introduction of Consumer Buy-To-Let.
Average Loan-To-Value (LTV) ratios were steady throughout the year at around 49%, maintaining responsible lending levels.
Interest rates were under constant downward pressure throughout the year, averaging 0.89% in Q1 before rounding off 2016 at an average of 0.78% in Q4, demonstrating how bridging finance has become more affordable.
Mortgage delays were again the most popular reason for taking out a bridging loan in 2016, like in 2015. Pressure on banks, prompted by increased regulation, acted as a bridging finance demand driver. Refurbishment was the second most popular reason for accessing a bridging loan in 2016, according to the data.
Average loan terms remained consistent at 10-11 months throughout 2016. Average completion time averaged 45 days in 2016, up from 40 days in 2015.
The final figures for 2016 show strong demand for bridging loans. Interest rates were again under consistent downward pressure throughout the year, as the bridging sector continued to be highly competitive. We are certainly witnessing consistency in the key market parameters we are seeking to benchmark.