Business and domestic borrowers alike are increasingly turning to independent brokers to access the finances they need with speed and simplicity. In order to cater to this growing demand for dynamic financial products, brokers and financial advisers alike are showing growing preference to bridging lenders and comparable independent service providers.
During the second quarter of 2017, bridging loan activity in the United Kingdom peaked at an impressive £150 million. Once a comparatively niche and unexplored area of the mortgage market, bridging finance has seen extraordinary gains over recent years, spiking a full 26% in Q2 compared to the first three months of the year. which represented the single highest quarterly increase since the launch of the Bridging Trends survey in 2015.
As for the primary motivations of brokers and clients alike for seeking these kinds of services, the vast majority cited the inevitable delays in receiving financial assistance from traditional banks and high-street lenders. Particularly when looking to arrange larger loans like mortgages, traditional lenders are increasingly being viewed as inconvenient and unnecessarily complicated access points by the modern consumer.
The most recent Bridging Trends survey found that the most common reason for bridging loan applications during Q2 last year was to fund refurbishments and general improvements. Approximately 27% of all successful applications indicated this particular use for the funds. Delays in traditional mortgage application completions were the second biggest motivator, accounting for 25% of all bridging lending during the period.
Another interesting finding was the way in which, in spite of bridging activity as a whole spiking dramatically, borrowers in general sought significantly lower sums of money than in previous quarters. The average loan-to-value (LTV) levels dropped to a new low of 45.4%, which again represents the lowest recorded since 2015. The struggling value of the sterling and ongoing uncertainty regarding Brexit are two of the possible factors contributing to the decline in average loan value.
On the whole, however, what’s clear is that the bridging industry in the United Kingdom is looking stronger than ever before as more lenders and borrowers alike explore alternatives to conventional mortgages and financial products.
Comparatively, low interest rates are also credited with the continuous growth of bridging loan applications across the UK, with average monthly interest rates coming out at 0.84% for the quarter.
“Demand for specialist finance remains strong, notwithstanding a slight increase in the average monthly cost of credit to the consumer,” commented MTF Director Joshua Ask, the group behind the Bridging Trends survey.
“What is interesting, however, is that for the first time since reporting began, mortgage delays are not the most popular use of a bridging finance loan, having been replaced by refurbishment.”
“While it is too early to form any conclusions, this may be indicative of a shift in the market. Coming off the back of recent increases in stamp duties and the changes to tax relief on buy-to-let property, more investors in this quarter focused on adding value to their existing investment properties.”