Gross short-term lending by contributors to Bridging Trends data jumped by 20% to an all-time high of £214.7m in the third quarter compared to the previous three months, driven by borrowers keen to keep up property chains.
This was the third consecutive quarterly increase in loans and the highest quarterly figure since the survey was launched by short-term finance lender MT Finance in 2015, which includes data from 12 specialist finance packagers.
The study says, “preventing a chain break became the most popular use of a bridging loan” in the period, accounting for 22% of transactions, up by 1% on the previous three months.
Purchasing an investment property – previously the most popular use of bridging finance for the five previous quarters – dropped by a third, accounting for 16% of the market, from 24%.
“This is an all-time low and could be due to investors exercising caution amid an unpredictable economic climate,” the survey points out.
Bridging loans for business purposes nearly doubled to 11% in the quarter from 6%, while auction finance also saw a jump in demand, rising to 8% from 5% in the second quarter.
The average loan-to-value level lifted in the quarter – to 59.6%, up from 56.2% in the prior three-month period.
Regulated bridging took up 45.2% of market share, up from 43.3% three months ago, the highest percentage in regulated bridging transactions since the first quarter of 2021.
The study says: “Pressure on industry professionals continued into the third quarter as demand soared – highlighted by the average completion time increasing to 60 days in the third quarter, from 57 days in the previous quarter.”
Also, the top three criteria searches by brokers in the period were ‘expatriates’, ‘family-gifted deposit’, followed by ‘flats – not new build’, according to criteria search platform Knowledge Bank.
The data comes after new Chancellor Jeremy Hunt last month reversed the vast majority of tax cuts announced in September’s mini-budget, although the stamp duty cut for house purchases remains.
The mini-budget led to more than a thousand products being pulled as lenders worked out how to reprice loans as the cost of debt for the government and companies lifted on international money markets, following former Chancellor Kwasi Kwarteng’s tax-cutting fiscal event.
Clifton Private Finance head of bridging Sam O’Neill says: “The total gross lending figure will be an interesting benchmark for the next quarter given the current uncertainty of 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.”
Brightstar bridging & development finance specialist Stephen Watts adds: “Following the base rate rises we’ve seen throughout this year and mortgage interest rates increasing across the industry, it’s no surprise that chain-break bridging is the biggest use of funds for the quarter.”
MT Finance commercial director Gareth Lewis says: “Considering the volumes we have seen in the third quarter, 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.
“While it’s too early for us to really feel the impact of September’s mini-budget, I expect this will be more visible in the fourth quarter.
“As predicted in the second quarter, interest rates have started to slowly rise to 0.73% but it is worth noting they are virtually on a par with the third quarter in 2021 (0.72%). I would not be surprised if interest rates continue to rise, and investors remain cautious.”
