Bridging loan interest rates drop to lowest level since 2015: MT Finance

Bridging loan interest rates fell to the lowest level in Q1 2019, according to the latest Bridging Trends data.

The research found that the average monthly interest rate on a bridging loan fell to 0.74 per cent in the first quarter of 2019, down from 0.8 per cent in Q4 2018, the lowest rate ever recorded by Bridging Trends since its launch in 2015.

This drop is driven mainly by the boost in regulated lending over the past three months. Regulated bridging loans increased for the first time since Q1 2018, with the number of regulated loans conducted by contributors increasing to 38.3 per cent in Q1 2019, compared to 31.6 per cent during Q4 2018.

The spike in regulated bridging activity also translated into lower loan-to-values, with average loan-to-value levels in Q1 2019 decreasing to 51.3 per cent, from 57 per cent in the previous quarter.

Bridging loan volume transacted by contributors hit £185.32m in Q1 2019, 8 per cent lower than the £201.57m lent by contributors in Q4 2018 but 20 per cent higher than a year earlier (£154.02m).

This comes as two new contributors join Bridging Trends – specialist finance packagers Impact Specialist Finance (previously AToM) and UK Property Finance.

The most popular reason for borrowers taking out a bridging loan in Q1 2019 was for the purchase of an investment property, as property investors continued to purchase property despite a backdrop of uncertainty surrounding Brexit.

The second most popular reason was for chain-breaking purposes, accounting for 19 per cent of all lending in the first quarter.

Bridging Trends is a quarterly publication grouping together figures from short-term loan lender MT Finance and specialist finance brokers Brightstar Financial, Clever Lending, Complete FS, Enness, Impact Specialist Finance, Positive Lending, Pure Commercial Finance, Y3S and UK Property Finance. It monitors the general trends in the UK bridging finance market.

Enness head of specialist lending Chris Whitney says: “I don’t think it comes as a surprise that interest rates are still under downward pressure as some of the industry’s more mature lenders seek out cheaper costs of funds to stave off the newer entrants – which is good news for consumers. As rates come down, short-term loans become a financially viable way of financing for more and more situations so actually increases business into the sector in my view.

MT Finance commercial director Gareth Lewis says: “Property investors are continuing to turn to bridging finance as a support tool, as reflected in the 22 per cent utilising the product for investment purposes.

“With highly professional specialist lenders offering flexible products at competitive rates, bridging finance has become an attractive proposition to those property investors who are looking to expand their portfolio and need certainty when conducting their business and who often need to move swiftly to capitalise on an opportunity.”

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