As we cautiously look towards a post-pandemic recovery for the finance sector, the bridging finance market continues to be a viable option for developers and investors looking to fund their residential or commercial projects.
How has the bridging loan market performed?
According to a figures released by Bridging Trends, the bridging loan market has remained stable in the second quarter of 2021, with first charge bridging loans making up around 90% of lending. This figure is up 12.2% in comparison to last quarter, which, according to the report, is due to investors seizing the opportunity presented by the Stamp Duty Land Tax holiday.
The report also went on to state that the top most common reason for using bridging loans was to fund a purchase of an investment property, increasing slightly from quarter one. The second most popular reason for using bridging finance was for a traditional chain break. This made up 21% of all transactions, and also increased from quarter one.
As well as this, average monthly interest rates increased slightly in the second quarter to 0.79%. This is up slightly from 0.74% in the first quarter. Loan to value levels, however, decreased slightly to 54.9%. The average time taken to process bridging loan applications fell from 53 to 47 in the second quarter.
How has the Stamp Duty holiday affected the bridging loan market?
As the Stamp Duty Land Tax holiday came to an end towards the end of June this year, more investors raced to seize the opportunity presented by the tax relief. This resulted in a 12.2% increase in the number of first charge bridging loans being taken out over the span of quarter two.
This rate of lending is likely to decrease over the rest of the year as the Stamp Duty threshold phases back to its normal rate from before the pandemic. However, as the threshold will remain at a higher figure of £250,000 until 1st October 2021, the rate of these bridging loans being taken out may still be higher than usual as investors continue to use this opportunity.
It may be also be possible that we will see an increase in enquiries after the stamp duty deadline passes as this may stop current “bidding wars” and the inflation of house prices. We expect that this may benefit property investors, as they will be able to source better deals on potential purchase properties where they can add value.
How can Finance 4 Business help?
If you’re an investor or developer looking for bridging finance or development finance to purchase land or property, we’re a finance broker that can help.
At Finance 4 Business, our team of experienced bridging finance specialists can offer expert advice on the options available to you, with an in-depth understanding of the property market and strong relationship with commercial lenders.
To find out more, speak to a member of our team by calling 0121 309 0444 or email enquiries@finance-4-business.co.uk.