Gareth Lewis, commercial director at MT Finance (mtf), says funding a development project is the most popular use for bridging finance.
Mr Lewis made his observation after seeing the latest results from the mtf Broker Sentiment Survey.
It shows that property investors are turning to bridging finance to fund development projects and refurbishments. And they are also taking advantage of liquidity on offer to improve new or existing portfolio properties and maximise the value of their assets.
Mr Lewis says that with mainstream lenders implementing tougher affordability restrictions, it has been harder for investors to access funds and the feedback from brokers suggests that more are turning to bridging finance as a result. He added:
"In particular, investors are looking to add value to a property rather than purchase a property as a straight forward portfolio investment.
“This trend is evidently not just limited to light and decorative refurbishment, but also property conversion, extensions, reconfiguration and smaller scale ground up developments.
“We believe we will continue to see a substantial rise in the demand for development and refurbishment products throughout the rest of the year.”
His comments come after it was revealed that a third of the 122 respondents in the survey said the most popular reason for taking out a bridging loan in the second quarter of this year was to fund a development project, up from 24 per cent during the same period of 2017.
Refurbishment was the second most popular reason for getting a bridging loan at 27 per cent, compared to 19 per cent during the second quarter of 2017.
Investors are opting for fast and flexible bridging loans to make improvements to properties and bolster yields against a backdrop of legislation that has made it tougher to buy new properties. At the same time mainstream banks continue to reign in lending.
Some 26 per cent of respondents said buy-to-let lending restrictions was the biggest challenge facing UK finance brokers, while 24 per cent said it was the Government’s continued changes to buy-to-let legislation.
Due to these challenges, overall demand for bridging finance increased in the second quarter, with 38 per cent of brokers noticing a rise in bridging loan volume, up from 30 per cent in the first quarter of 2018.
The biggest demand for bridging loans in Q2 2018 came from the South East at 30 per cent, followed by the midlands at 19 per cent.