speed drives bridging finance demand in Q3
The need for speed was highlighted again in the latest Bridging Trends data which was released earlier this month. Covering 2023’s third quarter, it paints a picture of how bridging finance continues to be a powerful tool for property investors. Created and compiled by MT Finance, Bridging Trends brings together figures from several specialist finance brokers, providing a snapshot of the latest trends shaping the UK bridging finance industry.
buyers look to specialist lenders for solutions
As UK economic uncertainty continued, an increasing number of borrowers turned to bridging finance to complete their property purchases, as the most popular use for bridging finance in Q3 was to prevent a chain break, accounting for 22% of total transactions.
The amount of bridging loans for financing an auction purchase also increased in the third quarter, up from 6% in Q2 to 10% in Q3. This increase is not surprising as online auction rooms have recently reported a rise in demand from savvy buyers looking to snap up property for approximately 85% to 90% of their market value.
One area which saw a decrease though was using bridging finance to fund property renovations which nearly halved from 13% in Q2 to 7% in Q3. This could be due to the slowing growth of house prices, causing landlords and developers to think twice before undertaking costly refurbishments.
purchases driven by speed
It’s safe to say that the main driver behind bridging finance demand during Q3 was speed. With purchases facilitated by mainstream lenders taking months to complete, a bridging loan can often be completed in a matter of weeks. For example, earlier this year we worked on an auction case for our client who was a portfolio landlord. They had recently submitted the winning bid on a residential property but needed to raise a further £292,500 within 28 days to secure the property. With a buy-to-let mortgage not going to be completed in time, they urgently needed a short-term fix.
We delivered a first charge bridging loan of £292,500 in only eight working days. This was set at 65% loan-to-value of the open market value of £450,000, over a 12-month term. The client was able to purchase the auction property without losing their deposit and even use a small portion of the funds to undertake light refurbishments.
The 12-month term will give them plenty of time to exit out of our bridging loan onto a buy-to-let mortgage at the property’s increased value and if this happens before the end of their term, they won’t face any exit fees or early repayment charges, features which are standard on all our bridging loans.
how MT Finance can help
We understand that time isn’t a luxury that many have in the current market and are determined to be as helpful and flexible as we can be to provide a solution. We will take a view on bridging finance enquiries that fall outside our published criteria and welcome first-time landlords, as well as those with adverse credit or complex income structures. What’s more, we can issue a decision in principle in a matter of hours, while the strong relationships we have built with solicitors, valuers, and other external partners allow us to move extremely quickly.
If want to find out more about how bridging finance could help with your next investment purchase–please don’t hesitate to get in touch. Our online form is quick and easy to fill in and a member of our team will get back to you shortly.
*Bridging Trends combines bridging loan completions from several specialist finance packagers operating within the UK bridging market: AFIG, Brightstar Financial, Capital B, Clever Lending, Clifton Private Finance, Complete FS, Enness, Impact Specialist Finance, LDNfinance, Optimum Commercial, Sirius Group, and UK Property Finance. The data for top broker criteria searches is supplied by Knowledge Bank.