Bridging loans most used to purchase investment property in Q3

For the third consecutive quarter, the most popular use of a bridging loan was to purchase investment property, according to the latest data from Bridging Trends.

The bridging publication revealed that 22% of all lending transacted by its report’s contributors in the third quarter of 2019 was for investment purchase purposes – a figure down from 25% during Q2 2019.

Bridging Trends suggested the latest data – which included contributions from the likes of MT Finance, Capital B Property Finance and Enness – highlighted how property investors and homeowners alike have continued to opt for fast and flexible bridging loans to purchase property while prices remain low against the backdrop of ongoing Brexit uncertainty.

MT Finance commercial director, Gareth Lewis, commented on the data: “Bridging loan activity for the third quarter remained stable, and coupled with the most popular uses, (this) is a good indication of strong demand from borrowers seeking to purchase property fast while prices are low, ahead of Brexit’s conclusion.

“It’s quite clear that the uncertainty of Brexit has had its effect on the London property market, with prices dropping significantly in many boroughs. This has prompted many property investors to utilise the speed of bridging loans to act quickly on opportunities.”

The data from Bridging Trends, which confirmed bridging loan growth weakened in Q3, estimated the bridging loan volume transacted by contributors at £181.64 million – a £3.2m decrease on the previous quarter.

The data revealed that bridging loans for business purposes, meanwhile, had decreased from 12% to 6% in the third quarter.

Director of Capital B Property Finance, Andre Bartlett, added: “We are still seeing strong demand for regulated loans for good clients, at low LTVs. The appetite for lenders for these types of deals remains healthy, and rates continue to be consistently low, and the competition is still fierce.

“The downside is average completion times for loans is heading in the wrong direction, but that may be due to matters outside of lenders’ hands. I would love to see the average completion time get down to below 40 days.”

Forty-two per cent of total loans transacted by Bridging Trends contributors were regulated – which was up from 37.5% in Q2.

Bridging Trends revealed this spike in regulated bridging activity translated into a lower average monthly interest rate in Q3, at 0.74%, representing a decrease of 0.05% on the previous quarter.

“It is a buyers’ market right now, especially for international buyers who are also taking advantage of the weak pound,” said head of specialist lending at Enness, Chris Whitney. “This, and suppressed prices due to the political uncertainty, mean that many international buyers are picking up assets at over 20% lower than they might have been three years ago.

“As it is a buyers’ market, many get good purchase prices agreed on the basis they can complete within a relatively short space of time. This means that the demand for the quick and straightforward short-term loans is very strong.

“Domestic investors need to use these products for similar reasons, quite often to also undertake improvements to the properties and getting them let before moving them on the longer-term investment loans.”

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