Completion Times for Bridging Loans Increase for the Third Quarter

Reviewing the latest bridging loan trends, the average completion times for bridging loans has increased from 43 days to 46 days. The increase occurred over the past quarter and has some brokers worried about the condition of the property market.

Potential Causes of the Increased Completion Times

Whilst many specialist brokers have expressed concern over the longer completion times for new bridging loans, many brokers believe that this increase is temporary.

Some brokers point out that the overall resource levels of the top lenders were directly impacted by annual leave during this time of the year. There was less staff available, resulting in gradual delays across every process including the approval of new bridging loans.

The total volume of bridging loans has also increased during this quarter. With an increased demand for bridging loans, some lenders were busier. The total volume reached £213.35 million for the third quarter of 2018, experiencing a £15.4 million increase.

The number of regulated bridging loans decreased during this same period. During the second quarter, regulated bridging loans accounted for 36.8% of all lending. They now account for 31.6% of all lending, resulting in the lowest levels since the beginning of 2015.

Brexit is often labelled as a top reason for changes in the property market. The uncertainty of the future causes the property market to slow slightly. As a result, some residential properties remain on the market longer and fewer transactions occur.

These issues lead to fewer regulated bridging loan applications. However, the commercial sector is still thriving. The total volume of bridging loans has increased. Lenders are struggling to compete for this extra business.

Bridging Loan Trends Result in Few Surprises

The increased average completion time was just one statistic revealed by the latest bridging loan trends. However, many of the other trends were expected. The reasons for obtaining bridging loans remain the same.

For example, refurbishment continues to be the most popular reason for needing a bridging loan. Mortgage delays continue to be the second most popular reason despite falling to 19% of all bridging loans from 20% the previous quarter.

Due to the uncertainty of the property market and greater competition, lenders have changed some of their loan products. The two biggest changes are related to interest rates and term lengths. Many lenders have slightly reduced their monthly interest rates with the average dropping by 0.8% during the past quarter.

Many lenders have also started to increase the maximum term for a bridging loan. These loans are considered short-term loans and typically offered with a length up to 12 months. However, many lenders have begun offering terms up to 24 months. Despite these changes, the average time to pay off the bridging loan remains 11 months.

These trends change every quarter and the increased average completion time for bridging loans had a mixed reaction from brokers. Some believe that the increase is troubling whilst others are waiting to see what happens next quarter. They also recognise that completion times can vary significantly with some lenders completing bridging loans within a couple of weeks.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes