Lending by bridging providers fell by 15% to £173.1m in the second quarter of this year, compared to £199.2m in the first quarter, based on data from some of the biggest lenders and brokers in the sector.
The latest Bridging Trends report from MT Finance also shows a year-on-year decline as gross lending by companies contributing to the report was £199.7m in Q2 last year.
MT Finance says that the war in Iran has had an impact on the timing of purchases.
President Trump’s initial promise that it would be a short operation may have seen some borrowers postpone transactions at the end of Q1 and start of Q2 – resulting in a lower contributor total.
However, as conflict dragged on many borrowers made use of the flexibility bridging loans can provide, MT Finance says.
When high-street lenders were pulling products and increasing rates, bridging became a useful tool to help borrowers meet tight deadlines.
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.
The rise in bridging loans used to prevent a chain break likely contributed to the increase in regulated bridging loans, which rose from 41% in Q1 to 48% in Q2 – the biggest quarterly increase since Q1 2022.
Bridging was also used by some investors to jump on opportunities.
Demand for auction finance rose from 11% in Q1 to 14% in Q2.
Elsewhere, homeowners, investors and business owners have all sought to unlock equity without disturbing their current mortgages.
The percentage of heavy refurb bridging loans rose from 6% in Q1 to 10% in Q2 while funding a business injection more than doubled to 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.
The average loan-to-value rose from 52% in Q1 to 55% in Q2, while the the average completion time fell from 53 days in Q1 to 46 in Q2.
Clever Lending commercial and bridging specialist Steve Sanderson says: “The Q2 data should act as a reminder of just how versatile bridging loans can be.
“The fact that more borrowers are using second charges to access equity 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.”
MT Finance bridging director Raphael Benggio says: “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.”
Knowledge Bank sales director Shane Chawatama says: “Bridging lending continued to shift towards larger and more complex cases in Q2.”
Criteria searches by brokers on Knowledge Bank reflect this, he says.
Chawatama adds:“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.”
