Stamp duty holiday drives bridging loans

The latest Bridging Trends data for quarter two, 2021 shows more landlords and investors used bridging loans to complete their property purchases quickly, before the Stamp Duty holiday savings started to reduce from 30 June 2021. Nearly a quarter (24%) of all borrowers used a bridging loan to make an investment purchase, an increase from 19% in quarter one, 2021.

The data also reports a change in the share of bridging loans secured on a first charge basis (no other loans held against the property). This increased to 90% up from 77.8% in quarter one 2021 and again suggests borrowers were looking to complete ahead of the stamp duty changes.
The second-most cited reason for using a bridging loan remained the same this quarter, with just over one in four borrowers using this to address a break in the chain.

Brokers, lenders, surveyors and solicitors all pushed hard during the quarter to complete as many loans as possible with the average completion time falling from 53 days in quarter one 2021 to 47 days in quarter two 2021. This was the fastest average completion time seen since quarter two 2019 at 44 days.

Overall lending was £146.52 million, slightly up on the first quarter of the year at £144.51m. The continual rise in house prices may have also helped to reduce average loan-to-values (LTVs) from 55.2% to 54.9% in quarter two 2021. Monthly interest rates for bridging loans also saw a marginal fall from 0.79% to 0.74% in quarter two 2021.

Gareth Lewis, commercial director at MT Finance comments:
“As purchases would have been at the top of people’s minds due to the stamp duty saving, it’s no surprise to see that first charge lending has significantly increase its share of transactional volumes. It will be interesting to see if this percentage decreases in the coming months as consumers look to raise finance out of existing properties to fund further property acquisitions or businesses.”

Strong demand from buyers has also been seen in the number of secured loans during June 2021. The Secured Loans Index from Loans Warehouse reported lending reaching £104.3 million, the highest level of lending since the pandemic began and in line with lending in June 2019 at £105m. Secured loans have very fast completion times, with an average of 17 days in June 2021.

46% of secured loans were for debt consolidation, 27% was for consolidation and home improvements and 19% for home improvements only. The average length of a secured loan term was 14 years.

Matt Tristam, Co-Founder of Loans Warehouse said:
“Lending increased 16% month-on-month and highlighted and incredible 365% record breaking year-on year increase, but let’s remember this was one of the pandemic lows for second charge lending.

“This was also a landmark month with Optimum Credit posting lending figures of £37.9 million which is believed to be the most lent by a single lender since the Credit Crunch.”

Representative Example: If you borrow £42,000 over 15 years at a rate of 8.59% variable, you will pay 180 instalments of £460.26 per month and a total amount payable of £82,846.80. This includes the net loan, interest of £36,356.80, a broker fee of £3,995 and a lender fee of £495. The overall cost for comparison is 10.9% APRC variable.

Compare secured loans.

Representative Example: If you borrow £42,000 over 15 years at a rate of 8.59% variable, you will pay 180 instalments of £460.26 per month and a total amount payable of £82,846.80. This includes the net loan, interest of £36,356.80, a broker fee of £3,995 and a lender fee of £495. The overall cost for comparison is 10.9% APRC variable.

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Borrowers should remember that secured loans often come with additional fees compared to an unsecured loan and their property is at risk if they cannot keep up their repayments.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOAN SECURED ON IT.

Loans are subject to status and valuation, secured on residential property and not available to those under 18. The APRC quoted will be offered to a majority of applicants. You may be offered a higher rate depending on your personal circumstances. All rates and terms may change without notice so please check with Loans Warehouse before undertaking any borrowing.