Regulated bridging sees largest quarterly rise since 2022 ‘out of necessity’
Borrowers are increasingly using bridging finance to keep property transactions moving amid wider economic uncertainty, according to the latest Bridging Trends Q2 report.
The use of bridging loans to prevent chain breaks rose from 14% of transactions in Q1 to 18% in Q2, according to the latest Bridging Trends report. Regulated bridging lending also increased from 41% to 48%, marking the largest quarterly rise since Q1 2022.
The report found that borrowers increasingly turned to bridging finance for its speed and flexibility, particularly as some mainstream lenders withdrew products and repriced loans.
Gross contributor lending fell 15% quarter-on-quarter from £199.2m in Q1 to £173.1m in Q2. Bridging Trends suggested that geopolitical tensions, including the conflict involving Iran, may have led some borrowers to postpone transactions towards the end of Q1 and the start of Q2.
Borrowers look to move quickly in a slower market
Wesley Davidson, broker at Fox Davidson, said he was seeing growing demand from borrowers looking to renovate properties or move quickly without waiting for existing homes to sell.
What mortgage and protection advisers should take from the FCA’s AI stance
Sponsored by Sesame Bankhall Group
Asked about the uptake of bridging loans, Davidson said: “I believe that some of it is out of necessity due to slower sales.
“Many clients are using bridging loans to improve property before letting it out or selling it on. Bridging is the perfect product for people looking to buy a property needing work and wishing to add value to it by completing the works themselves.
“On the regulated bridging side, we are seeing more people using a bridging loan due to needing to move quickly rather than waiting on their current main residence to sell.”
He added: “The uptake of bridging loans tells us that the slower market means people need finance products that allow them to move quickly or allow them to add value to a property by completing refurbishments. Proactive investors and homeowners are now regularly using bridging loans to great effect.”
Refurbishment and equity release lending gain momentum
Second charge bridging loans climbed from 9% in Q1 to 22% in Q2, their highest level since the sector recorded 22.2% in Q1 2021. The report suggested this reflected borrowers’ willingness to release equity while retaining existing mortgage arrangements.
Furthermore, demand for heavy refurbishment loans increased from 6% in Q1 to 10% in Q2, while funding for business injections more than doubled from 4% to 9%.
The report also noted that the growing focus on equity release contributed to the rise in second charge lending during the quarter.
Despite the increase in second charge loans, pricing remained largely stable. The average monthly interest rate fell marginally from 0.82% in Q1 to 0.81% in Q2.
Borrowers also appeared to prioritise speed, with average completion times falling from 53 days in Q1 to 46 days in Q2. The average loan term remained unchanged at 12 months.
Raphael Benggio, bridging director at MT Finance, commented: “Considering the ongoing uncertainty, it was inevitable that the bridging industry was going to be impacted by global events. Instead of postponing transactions indefinitely, borrowers have just adapted and it is extremely encouraging to see that they continue to be supported by the specialist finance sector.”
