Bridging loan completions rose 2.9% quarter-on-quarter to £201.8m in Q2, as borrowers attempted to rescue housing transactions.
According to the MT Finance Bridging Trends report, this was the highest figure since records began in 2015.
It found preventing a chain break was the top reason people chose bridging finance, accounting for 23% of transactions in Q2. This was up from a share of 19% during the previous quarter.
The share of borrowers using bridging finance for auction purchases saw the biggest increase since Q1, jumping from 9% to 14%, which was also an all-time high. MT Finance said this was likely due to buyers taking advantage of undervalue sales in the subdued property market.
The average processing time for finance fell from 58 days in Q1 to a three-year low of 52 days in Q2, which MT Finance said could be down to the rise in auction and chain break use for bridging.
William Lloyd-Hayward, group chief operating officer and managing director at Sirius Finance, said the data showed the “diverse ways” bridging could be used.
He said bridging was often seen as a tool for investors, but people using it to save a purchase from a chain break was an “everyday occurrence that could impact any homebuyer and any broker, and so those brokers who are not familiar with the bridging market should consider partnering with an expert in this area to ensure they are well-placed to best serve their clients”.
The second-most popular use of bridging finance in Q2 was to purchase an investment asset, making up 18% of business. However, this fell from a share of 21% in Q1, which MT Finance attributed to uncertainty caused by high interest rates and the general election.
Still demand for bridging finance
Despite this, the number of unregulated bridging loans increased from 49% in Q1 to 54.2% in Q2, indicating that landlords and investors were adapting to the rate environment.
Andre Bartlett, director at Capital B Property Finance, said: “Even amid high interest rates and economic uncertainties, the market is adapting well, with a notable shift towards unregulated loans and a slight decrease in interest rates and LTV ratios.
“This flexibility and responsiveness highlight the crucial role bridging finance plays in navigating today’s challenging economic landscape.”
According to data supplied by Knowledge Bank, although there was a decline in regulated bridging, it was still the top search criterion for bridging finance brokers in Q2.
The share of second charge bridging loans fell from 21.3% in Q1 to 11.6% in Q2, as borrowers prioritised purchasing a home over releasing equity.
MT Finance said the drop in second charge bridging volumes could explain why the average monthly interest rate fell from 0.89% to 0.86% from Q1 to Q2.
There was also a fall in the average loan to value (LTV), which declined from 60% in Q1 to 59.3% in Q2. The average bridging loan term stayed consistent at 12 months, the 11th quarter in a row it has been at this level.
Gareth Lewis, managing director at MT Finance, added: “With the property market relatively stagnant in Q2, specialist lending continued to offer a flexible approach to underwriting that further increased bridging’s attractiveness. This can be seen in the fact that this quarter’s contributor gross lending was a record high and is testament to the sector’s versatility.
“I am encouraged to see the uptick in unregulated lending and am hopeful that this marks a turning point for landlords and investors who have been hit so hard in recent years. That completion time dropped by six days from 58 to 52 indicates how hard everyone is working to get these deals over the line.”
The report combines bridging loan completions from specialist finance packagers AFIG, Brightstar Financial, Capital B, Clever Lending, Clifton Private Finance, Complete FS, Enness, Impact Specialist Finance, LDN Finance, Optimum Commercial, Sirius Finance and UK Property Finance.
Shekina is the deputy editor at Mortgage Solutions and commercial editor at Mortgage Solutions and Specialist Lending Solutions. She has nearly eight years of experience in the B2B publishing market, having previously covered the hospitality, retail, pet, accounting and jewellery sectors.
Shekina has worked for Mortgage Solutions and Specialist Lending Solutions for almost five years. Here, she covers the market’s breaking news stories, engages with professionals in the sector, and oversees any commercially agreed content in partnership with mortgage-related companies.
This includes presenting webinars and hosting roundtable discussions on developing themes in the mortgage sector.
She is an NCTJ-trained journalist and was nominated for the Headline Money Awards Mortgage Journalist of the Year in 2021.
In her spare time, Shekina likes to read, travel, listen to music and socialise with friends.
She currently reports on current events in the mortgage market and liaises with financial clients to produce sponsored content.
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