Bridging activity surges by 20% despite interest rates climbing for first time in 2022

The average monthly interest rate for a bridging loan has increased for the first time since the beginning of 2022, according to the latest Bridging Trends report.

Rates rebounded to 0.73% in Q3 from a record low of 0.69% in Q2 in response to the climbing cost of borrowing seen across the financial services industry, the report found.

Overall, gross bridging activity hit £214.7m in Q3 – a stark 20% increase on the previous quarter.

This surge marked the third consecutive quarterly rise in bridging activity and reflected the highest contributor lending amount since Bridging Trends launched in 2015.

The data identified a shift in popular bridging loan purposes – the use of bridging finance for investment purchases dropped by a third, from 24% to 16%, after remaining steady as the most popular use of bridging finance for the five previous quarters.

The all-time low may reflect the caution exercised by investors amid ongoing market volatility, according to the report.

Preventing a chain break therefore moved into the top spot, accounting for 22% of transactions in Q3 compared to 21% in Q2.

Stephen Watts, bridging and development finance specialist at Brightstar, said it was “no surprise” that chain-break bridging proved popular against the base and mortgage interest rate increases seen across the industry.

"Borrowers that have had mortgage products withdrawn on them with little or no notice or have lost their sale due to their buyers no longer fitting mortgage affordability criteria, would then turn to short-term funding solutions to ensure their purchase can still go through as planned,” he explained.

Regulated bridging, meanwhile, accounted for 45.2% of the market this quarter – the highest percentage in regulated bridging transactions since Q1 2021.

The average loan term of a bridging loan remained at 12 months, while the average LTV increased to 59.6% from 56.2% in Q2.

Average loan completion times inched up to 60 days from 57 days in the previous quarter as a result of skyrocketing demand.

Sam O’Neill, head of bridging at Clifton Private Finance, characterised the results as an “interesting benchmark” for the final quarter given the current uncertainty in the market.

“With uncertainty comes opportunity, and we are already seeing investors looking to capitalise on under market value transactions caused by panic-selling vendors.

“I anticipate investment purchases to increase in the next few months,” he said.

Gareth Lewis, commercial director at MT Finance, said the impacts of September’s mini budget are yet to be felt to their full extent, and will likely reflect in Q4.

He said: “Considering the volumes we have seen in Q3, bridging finance clearly continues to be a useful tool for homeowners and investors alike.

“What has been interesting is the drop-off in bridging being utilised for investment purchases, which is likely due to buyers taking stock of the current market.”


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