Contributor lending in bridging loans has increased by 15.3% in Q3, totalling £191m, increasing from £165.7m in the previous quarter, MT Finance has reported.

In its Bridging Trends publication, it has found that there was also a shift in the average monthly interest rate, jumping from 0.84% in Q2 to 0.94% in Q3. This is the highest shift reported since Bridging Trends was launched in the first quarter of 2015, where it hit 0.95%.

MT Finance said that this demonstrates how the current high interest environment and the base rate hikes have affected the sector.

The report also found that the average loan-to-value continued to sit comfortably under the 60%, increasing from 56.9% in Q2 to 57.3% in Q3. Borrowers may be borrowing more due to lower valuations caused by a softening in house prices.

Preventing a chain break remained the most popular use of a bridging loan, at 22% of total transactions in Q3. Meanwhile, property owners and developers became hesitant to take on costly renovations in the third quarter due to the slowing of house price growth as demand for bridging loans to finance heavy refurbishment projects plummeted from 13% in Q2 to 7% in Q3 - the lowest it has been since Q4 2020.

Demand for second charge bridging loans dropped for the fifth consecutive quarter, falling from 10.7% in Q2 to 10% in Q3 and after two quarters of extending its market share, demand for regulated bridging decreased from 48.7% in Q2 to 46.1% in Q3. However, ‘regulated bridging’ was the top criteria search made by brokers on Knowledge Bank's system in Q3, replacing ’minimum loan amount’.

Head of specialist lending at Enness Global, Chris Whitney, said: “Increased completion times have been a topic of hot conversation in the industry for some time now and reflected, frustratingly, in the data here. I appreciate we had the summer period but still think this is heading in the wrong direction. We await to see what next quarter looks like with interest.

“This time around we see the average interest rate on a par with 2015 levels. The base rate was 0.5% back then compared to 5.25% currently, so bridging rates haven’t risen proportionately with base rate. Possibly, bridging rates have been kept low by good levels of liquidity within the UK market and increased competition.”

Share Story: