The latest Bridging Trends data highlights the increase in bridging loan completion times. The time it took to complete a bridging loan extended from an average of 58 days in Q2 2023 to 62 days in Q3 2023. This delay is believed to be due to the “summer lull,” a seasonal slowdown that impacts many business operations during the warmer months.
Chris Whitney, the head of specialist lending at Enness Global, has noticed this increase. He said, “Increased completion times have been a topic of hot conversation in the industry for some time now.” While acknowledging the summer factor, he expressed concerns about this trend’s direction and is keenly watching the next quarter’s developments.
Interest Rates on Bridging Loans
An Uptick in Rates: Interest rates are always a significant factor when considering any loan. Recent data has shown that average monthly interest rates on bridging loans surged from 0.84% in Q2 to 0.94% in Q3 2023. This is almost as high as the peak of 0.95% seen in early 2015 when Bridging Trends began tracking this data. The current uptick can be attributed to the broader environment of high-interest rates and the recent base rate hikes.
Despite this rise, the bridging loan sector has seen an impressive 15.3% rise in transactions during Q3 2023, amounting to £191 million. This increase suggests that many borrowers still find value in the product, particularly given its flexibility.
Popular Uses for Bridging Loans
Preventing Chain Breaks: The primary reason borrowers turned to bridging loans in Q3 2023 was to prevent a property chain break, accounting for 22% of all transactions. This use underscores bridging loans’ role in ensuring smooth property transactions, especially in challenging scenarios.
Auction Purchases: Those buying properties at auctions increasingly leveraged bridging loans, with these transactions rising from 6% in Q2 to 10% in Q3.
Refinancing: Another area seeing growth is bridging loans for refinancing, both regulated and unregulated, at 12% and 10% respectively.
However, it wasn’t all growth across the board. Given the deceleration in house price growth, there was a reduced appetite for large-scale renovation projects. Bridging loans intended for such heavy refurbishment ventures dropped from 13% in Q2 to 7% in Q3. Additionally, the demand for second-charge bridging loans dipped slightly from 10.7% in Q2 to 10% in Q3.
Final Thoughts
William Lloyd-Hayward, the group COO at Brightstar Group, encapsulates the current bridging market sentiment well. He mentioned, “The latest Bridging Trends continues to demonstrate the ongoing resilience and versatility of the bridging market.” He acknowledges the interest rate hikes but highlights the persistent growth in lending, setting the bridging loan market apart from the term mortgage market.