Bridging Trends: Bridging figures hit by Covid-19
The latest figures from Bridging Trends reveal a 45% fall in gross bridging loan volumes in the first half of the year, as activity is dented by the Covid-19 lockdown.
In the six months to the end of June 2020, bridging loan volumes declined by £167.88 million- to £202.26 million, compared to £370.14 million of transactions in the first half of 2019.
Contributor bridging loan volume was £122.86 million in the first quarter of 2020, falling sharply from £180.94 million in the final quarter of 2019 – activity further declined in the second quarter to £79.4 million. The significant drop in volume is primarily attributable to the disruptions caused by the Covid-19 pandemic.
Second charge lending peaked to the highest level since Bridging Trends launched in 2015, accounting for an average of 26.1% of total market volume in Q2 2020 – up from 24.4% in Q1 2020 and 23% in Q4 2019.
Regulated bridging lending hit a record high in Q2 2020, increasing its market share to an average of 55.6% of all lending, compared to 37.5% in the same quarter of 2019. This is the first-time regulated transactions outperformed unregulated transactions since Bridging Trends launched.
The average weighted monthly interest rate in Q2 2020 increased to 0.85% – up from 0.8% in Q1 and 0.75% in Q4 2019. This is the highest average monthly interest rate recorded in Bridging Trends data since Q3 2016.
Average LTV levels decreased to 48.8% in Q2, from 51% in Q1 2020 and 54.1% in Q4 2019. This could be attributed to the number of bridging lenders removing high LTV products from their product ranges during the lockdown period.
For the 7th consecutive quarter, the average term of a bridging loan remained at 12 months.
Despite operational difficulties, the average completion time on a bridging loan application has remained consistent over the last four quarters- reporting an average completion time of 50 days in Q2 2020, 49 days in Q1 2020 and 51 days in both Q4 and Q3 of 2019.
For the sixth consecutive quarter, the most popular use of a bridging loan was to purchase investment property. A quarter (25%) of all lending transacted by the report’s contributors in Q2 2020 was for investment purchase purposes, increasing from 20% during Q1 2020 and 22% in Q4 2019. The data highlights how property investors continue to opt for bridging loans to purchase property, against a backdrop of ongoing uncertainty.
Refinancing a bridging loan was the second most popular use for bridging finance, contributing to 13% of all lending in Q2 2020, up from 8% in Q1 2020 and 11% in Q4 2019.
We are presently living through unprecedented levels of uncertainty and the drop in bridging transactions is not wholly unexpected, given the restrictions on conducting physical valuations until May, servicing challenges, and significant uncertainty around any possible economic downturn.
MT Finance has seen a definite increase in second charge loans as business owners continue to invest to help support their business.
It will be interesting to see what happens over the coming months, but hopefully the sector can look forward to buoyant growth.