"This year, the percentage of regulated business may increase as we are aware of several non-regulated lenders looking to become regulated in 2017"
Bridging Trends is conducted by bridging lender MTF and a number of the industry’s specialist finance brokers including Brightstar Financial, Enness Private Clients, Positive Lending and SPF Short Term Finance.
The year kicked off to a strong start with £125.35m of bridging loans completed by Bridging Trends contributors in Q1, before cooling off during Q2 to £91.11m, due to uncertainty in the run up to the referendum. Volume picked up again in Q3 rising to £140.49m, before dropping in the fourth quarter to £125.66m.
Volume during the first, second and fourth quarters of 2016 all exceeded levels compared to the same quarters in 2015.
A significant percentage of bridging loan activity was unregulated in 2016 at an average of 55.5% of all deals, although regulated business increased to 44.4% of all deals in 2016 compared to 36.5% in 2015, due to changes in regulation and the introduction of consumer buy-to-let.
Interest rates were under constant downward pressure throughout the year, averaging 0.89% in Q1 before rounding off 2016 at an average of 0.78% in Q4.
Mortgage delays continued to be the most popular reason for taking out a bridging loan in 2016.
Average loan terms remained consistent at 10-11 months throughout 2016, and average LTV ratios were steady at around 49%.
Joshua Elash, Director of MTF, commented: “The final figures for 2016 show strong demand for bridging loans. Interest rates were again under consistent downward pressure throughout the year, as the bridging sector continued to be highly competitive."
Chris Whitney, Head of Specialist Lending at Enness Bridging Finance, said: “Political issues both in the UK and overseas – including Brexit, the US election and the far right gathering ground in Europe – have led to an increase in activity volumes for specialist lenders in our opinion, as lenders outside this space took their time to evaluate the potential impacts, holding back from lending.
“It is slightly surprising to see the number of regulated loans among specialist lenders decreasing in Q4, as we are still finding that high street lenders are struggling to come to terms with regulations, suggesting that specialist lenders may pick up these cases. This year, the percentage of regulated business may increase as we are aware of several non-regulated lenders looking to become regulated in 2017."
Kit Thompson, Director of Short Term Lending at Brightstar Financial, added: “The bridging Trends data for Q4 and across the whole of 2016 shows that the sector remains strong and is still growing, although growth in 2016 slowed when compared to the previous year’s growth. No surprise that average rates have reduced, with increased competition in the sector, lenders have had to drop pricing to remain competitive and keep market share.
“New entrants continue to join the sector and lenders are awash with cash to lend. Non-regulated bridging transactions will always outstrip regulated and LTVs remained reassuringly comfortable for lenders, promoting sensible lending practise throughout our industry. January has started very strong and we expect another strong growth year for bridging.”
Christopher Borwick, Director of SPF Short Term Finance, concluded: “Although there are the obvious external factors that may have a bearing on how 2017 unfolds the market remains resilient and we are confident of a good year ahead.”
