According to the latest MT Finance bridging trends report, £79.4m worth of bridging deals were completed from May to July 2020, down from £184m in the same period of 2019 and from £123m in Q1 2020.

As a result, in the six months to the end of June 2020, bridging volumes declined by £168m to £202m, compared to £370m in the first half of 2019.

The lender takes data from ten packager firms to form its analysis of the state of the market and contributors including Impact Specialist Finance, Adapt Finance and Sirius Finance, said the drop was 'inevitable.'

Analysis

MT Finance commercial director Gareth Lewis said: “We are presently living through unprecedented levels of uncertainty and the drop in bridging transactions is not wholly unexpected, given the restrictions on conducting physical valuations until May, servicing challenges, and significant uncertainty around any possible economic downturn.

“MT Finance has seen a definite increase in second charge loans as business owners continue to invest to help support their business,” he added.

Sirius Finance associate Craig Booth added: “We cannot be surprised at decreased lending and a higher rate average, the first inevitable and the second due to changes in risk.

“What is surprising is the re-bridging of a bridging loan increase. Supporting existing clients should be just as important as new business in challenging markets.”

Dan Kettle of Octagon Capital commented: “The drop in bridging volumes in Q2 is unsurprising. During the covid-19 lockdown, very little action could really take place, since there was no property valuations, certainly no auctions and most lenders had temporarily turned off their lending.”

“But that does not mean that things won’t improve. There has been real enthusiasm to get deals done and get out there at the moment, especially whilst covid-19 threats are relatively low and if a second wave comes back to bite us.”

How lenders are readjusting

Despite operational difficulties, the average completion time on a bridging loan application has been consistent over the last four quarters and remained at 50 days during Q2.

Average loan to value (LTV) levels decreased to 48.8 per cent in Q2, from 51 per cent in Q1 2020 and 54.1 per cent in Q4 2019.

MTF noted that, “this could be attributed to the number of bridging lenders removing high LTV products from their product ranges during the lockdown period.”