Jump in bridging loan applications from smaller buy-to-let investors

During the summer of 2016 the number of bridging loan applications from smaller buy-to-let investors reduced, but has now recovered.

The latest report from the Association of Short Term Lenders, as reported by MortgageSolutions.co.uk in March 2017, showed that applications for bridging loans dipped in the third quarter of 2016, probably due to uncertainty following the Brexit vote, but there was a significant rise of 27.5% in the last quarter of the year.

The bridging lender West One, reported that the average bridging loan rose from £798,198 in July to £1,189,574 in September, then decreased to £1,037,128 at the end of 2016. The interpretations of these figures could be that smaller buy-to-let investors did not purchase property in the summer immediately after the EU vote, but returned to property investing in the last quarter. Competition amongst bridging lenders has kept interest rates low on bridging loans and this has helped landlords.

Lenders have also seen an increase in the number of limited companies applying for buy-to-let bridging loans. Landlords are forming companies because they are not subject to new tax rules that affect private landlords. Landlords are also diversifying into semi-commercial property with mixed residential and commercial use that are also exempt from the tax changes.

Though bridging loans are short term, they are flexible and can be arranged quickly. Many landlords use them to complete purchases on property bought at auctions before more long-term finance can be arranged. Bridging loans can also be used to finance refurbishments on property before tenants move in.