The first quarter of the year generated a total of £156.78m in bridging loan transactions, representing an increase of 8.5% compared to Q1 2022, according to the latest data from contributors to Bridging Trends. 

The 12 specialist finance packagers reported that bridging transactions in Q1 2022 also increased from the previous quarter by 7.8% when it totalled £145.42m. 

The data found that more borrowers turned to bridging finance in Q1 with the most popular use of a bridging loan for the fourth consecutive quarter being to purchase an investment property, accounting for 26% of all loans in Q1 2022, down from 29% in Q4 2021.

Trying to get property purchases moving accounted for the greatest increase in demand for bridging, jumping to 23% of all lending, from 18% in the previous quarter. 

Borrowing was cheaper in Q1 as the average monthly interest rate on a bridging loan fell to a historical low of 0.71% in the first quarter of the year, down from 0.77% in Q4 2021.

Bridging Trends says the drop in pricing was driven by the boost in regulated lending over the past three months as demand for regulated bridging loans increased for the first time since Q1 2021. 

The number of regulated loans conducted by contributors increased to 43.9% in Q1 2022, compared with 36% in Q4 2021.

The spike in regulated bridging activity translated into lower loan-to-values (LTVs), with the average LTV in Q1 decreasing to 54.5% from 57.3% in Q4 2021. 

Data from Knowledge Bank found that the top criteria search made by bridging finance brokers on their system in Q1 2022 was ‘regulated bridging’.

Bridging loans for business purposes saw the greatest decrease in demand with total transactions falling from 15% to 10%.

Due to more purchase transactions over the quarter, the volume of second charge bridging transactions dropped to 11.9% of all loans during Q1 2022, from 17% in the previous quarter and 22.2% in the same period last year.

Elsewhere, the average term of a bridging loan remained at 12 months during the first quarter. A completion time of 53 days during Q1 2022 was lower than an average completion time of 56 days during Q4 2021.

Impact Specialist Finance managing director Dale Jannels says: “This latest Bridging Trends highlights more than ever that cash is king. This applies to homeowners wishing to get their offer accepted before they have sold their own property, as well as investors wanting to raise funds quickly to invest in stock or refurbish existing to achieve better yields for example.”

“The shortage of suitable housing stock will undoubtedly drive increased volumes in the bridging sector for the foreseeable future,” Jannels explains.

Clifton Private Finance head of bridging Sam O’Neill comments: “It’s good news across the board…increased borrowing and lower rates – what’s not to like? Gross lending being substantially up isn’t a surprise, looking at our figures, enquiries are up, applications are up, and completions are up. Could this be linked to increased competition in the lender market and historically low rates which are also reflected in the data? Could we still be looking at long-standing hangover figures from the surge that the stamp duty holiday brought, or could this be the new normal?”

“The increase in chain break transactions and regulated bridging is another positive sign. An increasing number of homeowners are seeing bridging finance as something they can confidently rely on and trust as a viable financial product. When looking for reassurance that the industry is going in the right direction, we can’t ask for more positive feedback than that.”