Bridging Trends contributors reported £201.8m in bridging loans in Q2 2024, a 2.9% increase on Q1’s £196.2m.
The latest figures represent the highest Q2 figure since Bridging Trends records started in 2015.
Bridging Trends combines bridging loan completions from several specialist finance packagers operating within the UK bridging market.
Of those bridging loans taken out in Q2, 23% were used to prevent a chain break, as borrowers faced continued conveyancing delays in the mainstream mortgage market. This compares to 19% in Q1.
Demand for auction finance saw the biggest rise, jumping from 9% in Q1 to 14% in Q2.
It notes that this is likely due to an increased number of savvy buyers taking advantage of undervalued sales as the property market remained relatively flat.
It suggests that the rise in bridging loans to prevent a chain break or fund an auction purchase may have contributed to the average processing time falling from 58 days in Q1 to 52 in Q2.
Purchasing an investment asset was the second most popular use of a bridging loan but fell from 21% in Q1 to 18% in Q2 against a backdrop of uncertainty caused by sustained high interest rates combined with an early general election. Regardless of this, the number of unregulated bridging loans rose from 49% in Q1 to 54.2% in Q2 as landlords and investors adapted to the new normal.
Data provided by Knowledge Bank showed that despite the decrease in regulated bridging, it remained the top criteria search made by UK bridging finance brokers in Q2.
After a strong quarter in Q1, the proportion of second charge bridging loans dropped from 21.3% to 11.6% in Q2 as borrowers prioritised purchasing a property instead of releasing equity.
This fall in second charges could be why the average monthly interest rate fell marginally from 0.89% in Q1 to 0.86% in Q2.
The average loan-to-value also dropped fractionally, from 60% in Q1 to 59.3% in Q2. Elsewhere, the average term remained at 12 months for the eleventh consecutive quarter.
MT Finance managing director Gareth Lewis says: “With the property market relatively stagnant in Q2, specialist lending continued to offer a flexible approach to underwriting that further increased bridging’s attractiveness.”
“This can be seen in the fact that this quarter’s contributor gross lending was a record high and is testament to the sector’s versatility. I am encouraged to see the uptick in unregulated lending and am hopeful that this marks a turning point for landlords and investors who have been hit so hard in recent years. That completion time dropped by six days from 58 to 52 indicates how hard everyone is working to get these deals over the line.”
