Once again, chain breaks have topped the rankings as the most common application for UK bridging loans for a second consecutive quarter. New figures published by Bridging Trends suggest that during the first three months of the year, a full 20% of all bridging loans issued in the UK were used for chain brake purposes.
This would equate to a minor fall of around 3% from the closing quarter of last year, but nonetheless indicates the ongoing popularity of bridging finance among homeowners planning relocations.
Investment property purchases were the second most popular bridging finance application during Q1, accounting for around 19% of all loans issued. Again, a slight decrease from the 21% recorded in Q4 2020, but impressive performance nonetheless.
With small to medium sized businesses once again opening their doors post-lockdown, bridging finance activity for business purposes increased significantly to 14% in Q1, much higher than the 10% recorded in Q4 last year.
Total Bridging Finance Volumes up by 5%
Evidence also indicates a significant increase in overall bridging finance activity during the first three months of the year, up around 5% compared to the three months prior. According to Bridging Trends, total lending for Q1 came out at around £144.5 million.
Meanwhile, average interest rates during the quarter fell slightly from 0.8% to 0.74% per month, compared to the same time last year. The average bridging loan LTV saw a slight increase from 51.3% to 55.2%, year-on-year.
According to Bridging Trends, the most commonly used search terms by brokers throughout Q1 were ‘maximum LTV’, ‘regulated bridging’ and ‘minimum loan amount’.
Commenting on the findings, Kimberley Gates of Sirius Property Finance said it came as no surprise to learn that more people were using bridging finance for chain breaks than for any other purpose.
“Given the turbulence of the past year and the pressure to meet the SDLT relief deadlines, it is to be expected that chain breaks are the most popular use for bridging finance for a second consecutive quarter,” said the head of strategic partnerships at Sirius Property Finance.
“That said, we are finding that bridging is increasingly being seen as an important part of any savvy investors toolkit and not just a last resort,”
“We certainly always consider the suitability of bridging products when structuring our clients’ finance packages, in particular for those seeking to move quickly and make the most of the many opportunities in the property market currently for portfolio growth, thus it is no surprise that investment purchase follows as a close second for the top purposes for bridging finance.”
Her sentiments were echoed by Chris Whitney, head of specialist lending at Enness, who said that strength of the bridging sector lies in its accessibility, diversity and flexibility.
“I think we are very lucky to have the range of products at our disposal that we do,” he said.
“20% of the total loans arranged by contributors being for chain breaks is an awful lot of individuals, families, and companies whose lives have been helped in very challenging times by the short-term lending industry.”