Bridging loan market value falls but loan sizes increase

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Recent search has shown that the total market value for bridging loans has fallen.

In the report collecting data from the first quarter of 2019, the total value of bridging loans was £5.5 billion. Compared to the last quarter of 2018, this marks a fall. Last year, the total value of bridging loans was approximately £5.7 billion.

There are around 40 bridging providers in the UK, with the most well-known including Precise Mortgages, Commercial Acceptances and MT Finance.

Bridging loan completions are down

In addition, the most recent figures provided by the Association of Short-Term Lenders (ASTL) has also shown that bridging loan compilations have fallen in 2019. This is despite the fact that applications for this type of short-term finance have increased.

Average loan size grows in 2019

Nevertheless, despite the small dip in the bridging loan market, other areas have continued to rise, such as the average loan size for bridging loans.

Compared to the last quarter of 2018, the average loan size now in 2019 had risen by over 11 percent.  For example, the average length of a bridging loan in the UK used to be approximately nine months, and this figure has now risen to an average loan of around 10 to 12 months.

What has contributed to these factors?

What do these figures reveal, and what has attributed to the rise and fall of different aspects of bridging finance?

A number of bridging loan experts have stated that 2018’s final quarter figure was always going to be difficult to beat, given that the number was a new high for the bridging loans market. As a result, trying to top this number was inevitably going to pose a considerable challenge.

A stagnant property market has been highlighted as a reason for the increase in time on loan completions, as exiting a loan through the completion of a property is taking longer than usual.

For example, according to RICS, the time it now takes for a residential property in the UK to sell (from listen to completion) is now the longest it has ever been since monitoring was introduced in 2017 – 19 weeks on average.

Benson Hersch, the chief executive officer at the Association of Short Term Lenders has highlighted another reason as to the bridging loan dip – concerns over Brexit. Cited by a number of different sectors as one of the reasons to be contributing to falls in sales, it also remains the case for the bridging loan market.

A number of consumers have been left feeling uncertainty and lacking confidence as a result of the lack of answers as to what the outcome of Brexit will be, leaving them more reluctant when it comes to bridging loans.

However, many commentators like Hersch believe that the variety of delays regarding Brexit has led to a ‘pent-up demand’ in property. As a result, if a successful resolution is found with Brexit, it could be positive for the bridging loan market, leading to renewed liquidity and more transactions too.

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