Bridging Trends testament to industry’s versatility
Earlier today, the latest Bridging Trends data was released. Compiled by us here at MT Finance and covering the first three months of 2024, they show that contributors transacted £196.2 million in bridging loans during this timeframe, maintaining momentum from Q4 2023’s £195.5 million.
These quarterly figures act as a snapshot of the UK bridging finance industry and analyse a variety of different markers, including the average monthly interest rate and how borrowers are utilising bridging loans. Read on to find out more, as well how you can maximise bridging’s versatility.
investment purchases and preventing chain breaks lead the way
With inflation continuing to fall, it now seems to be a case of when not if the Bank of England lowers its base rate. Subsequently, landlords and investors could be wary of locking in high, long-term mortgage rates in the current climate. Instead, a bridging loan gives them the space to wait for a rate decrease and often allows them to exit without facing any early repayment charges. As with last quarter, funding an investment purchase remained the most popular use of a bridging loan in Q1, accounting for 21% of all transactions. This was closely flowed by preventing a chain break which rose from 16% in Q4 to 19% in Q1.
a viable alternative for SMEs
Meanwhile, business owners have found it increasingly difficult to access funding as high street lenders tightened their criteria. Not only can business injections be harder to obtain but they also seem to be getting more expensive and slower to implement. Unsurprisingly, this had a direct impact on the number of borrowers turning to specialist lenders to facilitate a business purpose bridging loan in Q1, with demand nearly doubling from 8% in Q4 2023 to 15% in the first quarter of 2024.
That a bridging loan has more scope to be flexible will be another reason for this uplift, with lenders able to take an applicant’s plans and circumstances into consideration. A bridging loan can also be significantly quicker than its high street counterpart.
the appeal of second charges
Leveraging equity was another standout trend from the first quarter. With house prices not softening as dramatically as some predicted they would, many property owners have a substantial amount of equity but could be unwilling to disturb their current mortgage rate, particularly if it is favourable. Instead, a second charge bridging loan, allows them to unlock their equity without impacting their first charge. This saw the proportion of second charges soar from 11.6% in Q4 to 21.3% in Q4 – a three-year high since Q1 2021’s 22.2%.
As well as equity, their ability to be used as part of a cross charge could also be why there’s been such a jump in the number of second charge bridging loans in Q1. This allows borrowers to secure additional finance when they can’t raise the desired amount against only one security property.
interest rates start to fall
Last but no means least, the continued stabilisation of the Bank of England base rate likely impacted the marginal drop in the average monthly interest rate which fell from 0.91% in Q4 to 0.89% in Q1.
making bridging work for you
As your needs continue to change, we remain committed to supporting the landlord and investor community, regardless of external factors. Available for a variety of different purposes, our bridging loans are fast and flexible and we are driven by a desire to achieve the best possible outcome for you. Each application is manually underwritten, allowing us to assess every one on its individual merits.
Residential, commercial, and semi-commercial properties are accepted as security and we consider many income structures including clients who are self-employed, in a partnership or own a limited company. Cross charges, second charges and refinances are all options that we can also assist with.
We always do everything we can to adhere to your deadlines and recently introduced automated valuation models (AVMs) to further reduce completion time. AVMs can be used on standard residential bridging property applications up to a maximum loan-to-value (LTV) of 60%, a maximum value of 60% and a maximum loan size of £450,000. Even better, we accept AVMs on both first and second charges.
If you have a query that you’d like to discuss with us then we’d love to hear from you. Either drop us an email or submit an enquiry and we’ll respond 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.