Finance

Bridging finance demand climbs in Q2


Demand for bridging finance increased in the second quarter as gross lending hit £201.8m, according to the latest Bridging Trends data.

This was a 2.9% rise on the £196.2m reported in Q1 and was the highest Q2 figure since Bridging Trends records began in 2015.

Bridging Trends is a quarterly publication developed by short-term finance lender, MT Finance, to offer a general snapshot of the bridging finance sector.

The figures combine bridging loan completions from several specialist finance packagers operating in the UK bridging market, which include AFIG, Brightstar Financial, Capital B, Clever Lending, Clifton Private Finance, Complete FS, Enness, Impact Specialist Finance, LDNfinance, Optimum Commercial, Sirius Finance and UK Property Finance. The data for top broker criteria searches is supplied by Knowledge Bank.

The majority of bridging loans taken out in Q2 (23%) were used to prevent a chain break – rising from 19% in Q1 – as borrowers faced continued conveyancing delays in the mainstream mortgage market.

Demand for auction finance saw the biggest rise, climbing from 9% in Q1 to 14% in Q2. This was likely due to an increased number of buyers taking advantage of undervalue sales as the property market remained relatively flat.

The rise in bridging loans to prevent a chain break or fund an auction purchase may have also contributed to the average processing time falling from 58 days in Q1 to 52 in Q2.

“With the property market relatively stagnant in Q2, specialist lending continued to offer a flexible approach to underwriting that further increased bridging’s attractiveness,” commented managing director at MT Finance, Gareth Lewis.

“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 Bridging Trends figures also showed that following a strong quarter in Q1, the proportion of second charge bridging loans plummeted from 21.3% to 11.6% in Q2, as borrowers prioritised purchasing a property instead of releasing equity.

This fall in second charges could be why the average monthly interest rate fell marginally from 0.89% in Q1 to 0.86% in Q2.

The average loan-to-value also dropped fractionally, from 60% in Q1 to 59.3% in Q2. Elsewhere, the average term remained at 12 months for the eleventh consecutive quarter.

Director at Capital B Property Finance, Andre Bartlett, suggested there has been a “significant uptick” in the bridging loan market.

“This growth seems to be fuelled by the urgent need to prevent chain breaks in property transactions, especially as the traditional mortgage market faces delays. I’ve seen more people turning to auction finance than ever before, taking advantage of undervalued properties, which is an exciting trend.

“The faster processing times for these loans make them an attractive option for those needing quick access to funds. 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 loan-to-value ratios. This flexibility and responsiveness highlight the crucial role bridging finance plays in navigating today’s challenging economic landscape.”




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