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Latest Trends Indicate Lower Levels of Regulated Bridging Loans


Regulated bridging loans continue their downward trend, resulting in the lowest levels since the first quarter of 2015. The decrease in the number of unregulated bridging loans coincides with the decrease in residential property transactions.

The housing market has experienced a slight slowdown and the total number of regulated bridging loans has decreased with it. However, the overall volume of bridging loans has risen to £213.35 million for the third quarter of 2018.

Unregulated Versus Regulated Bridging Loans

While regulated bridging loans have reached their lowest levels in the past three years, unregulated bridging loans remain popular. The total volume of all bridging loans has increased each quarter, indicating an increased demand for unregulated bridging loans.

Unregulated bridging loans are primarily used for the purchase or refinancing of commercial and residential properties that are rented out, refurbished, or sold. These bridging loans are secured on properties that are only for investment or business purposes.

Regulated bridging loans are mostly used for refurbishments and mortgage delays. These remain the most common reasons for borrowers to seek a regulated bridging loan. In fact, refurbishments remained the top reason for the second quarter.

Residential Properties Are Taking Longer to Sell

One of the potential causes of the decreased regulated bridging loan levels is the gradual slowdown in the housing market. Residential properties are remaining on the market for longer, resulting in fewer property transactions.

Other changes in the bridging loan market include more first-charge loans and longer completion times. Lending for first charge loans has increased, reaching 84% of the loan market compared to 81% in the second quarter. However, second-charge loans fell to 16% from 19% in the previous quarter.

The completion times for bridging loans rose to 46 days compared to 43 days in the previous quarter. However, this increase is common during the third quarter due to the annual leave that is taken by employees this time of the year.

Crowded Marketplace Results in Lower Interest Rates

Lenders have already noticed the slow shift in the property market. As properties are taking longer to sell, a slight reduction in the number of regulated bridging loans is to be expected. More investors are holding off on purchasing new properties to wait and see what changes Brexit may bring.

According to the latest statistics, interest rates have also changed. The average interest rate experienced a 0.8% drop in the third quarter, resulting in the lowest rate since the end of 2016.

Specialists explain that the drop in monthly interest rates is due to tougher competition. The UK currently has a crowded marketplace with many lenders offering a diverse selection of loan products.

Brokers that specialise in bridging loans also believe that this downward trend is not likely to end any time soon. The competition should lead some lenders to drop their interest rates to help them stand out in the overcrowded bridging loan marketplace.

The decrease in the number of regulated bridging loans is not indicative of the number of enquiries. Many specialist brokers have revealed an increase in these enquiries, showing that more people are interested in finding a suitable regulated bridging loan.

In the end, these statistics do not signal any major, unexpected shifts in the market. Lenders are already taking steps to help increase the volume of regulated bridging loans, including lowering their interest rates.

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