Regulated bridging surges as borrowers adapt to global uncertainty

Regulated bridging rose to 48% in Q2 as average completion times fell by seven days, according to the latest Bridging Trends data.

The impact of the conflict in Iran on borrowers was highlighted in the report with gross contributor lending of £173.1m, a 15% drop from Q1’s £199.2m.

Preventing a chain break and purchasing an investment property were the most popular uses of bridging loans, both accounting for 18% of all transactions in Q2, compared to 14% and 22% in Q1 respectively.

MT Finance, which developed the report, said the rise in bridging loans used to prevent a chain break likely contributed to the largest quarterly increase in regulated bridging loans since Q1 2022.

Bridging was not just used as a last resort, with demand for auction finance rising from 11% in Q1 to 14% in Q2.

The percentage of heavy refurbishment bridging loans rose from 6% in Q1 to 10% in Q2 while funding a business injection more than doubled, coming in at 9% in Q2 compared to 4% in Q1.

This focus on equity release saw the proportion of second-charge bridging loans soar from 9% in Q1 to 22% in Q2, the highest level since hitting 22.2% in Q1 2021.

Despite the increase in second charge lending, the average monthly interest rate was relatively static, decreasing marginally from 0.82% in Q1 to 0.81% in Q2.

Encouragingly, the average LTV may have risen from 52% in Q1 to 55% in Q2, but it is still well below 60%, which MT Finance said showed that borrowers are not overburdening themselves.

As borrowers prioritised speed, the average completion time fell from 53 days in Q1 to 46 in Q2.

The average term remained static at 12 months.

According to Knowledge Bank, the search terms made by UK bridging finance brokers that saw the biggest changes were ‘cross collateral charges’, ‘lease extension before completion’ and ‘holiday lets’.

Bridging Trends combines bridging loan completions from several specialist finance packagers operating within the UK bridging market: Adapt, Brightstar Financial, Brilliant Solutions, Capital B, Clever Lending, Clifton Private Finance, Complete FS, Enness, Impact Specialist Finance, LDNfinance, Optimum Elite and Sirius Finance.

Steve Sanderson, commercial and bridging specialist at Clever Lending, commented: “The Q2 data should act as a reminder of just how versatile bridging loans can be.

“The fact that more borrowers are utilising second-charges to access equity, which some products don’t allow, is testament to the support brokers and lenders have been giving their clients to ensure a positive outcome is achieved.

“I expect this approach to thinking outside of the box to continue well into Q3 and Q4.”

Raphael Benggio, bridging director at MT Finance, said: “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.” 

Shane Chawatama, sales director at Knowledge Bank, added: “Bridging lending continued to shift towards larger and more complex cases in Q2.

“The search term ‘cross collateral charges’ was the standout riser for the second consecutive quarter, while ‘maximum property value’ also saw strong growth, suggesting increased demand for higher-value borrowing.

“‘Development finance for commercial property’ was another notable mover, highlighting continued interest in commercial development opportunities and more sophisticated funding requirements.

“Commercial properties are continuing to be a good option for investors in the market.”