Quarterly bridging loan finance volumes were once again up for the first three months of the year, recording impressive growth of 22% compared to the same three months in 2021. The total value of all UK bridging loans issued came out at £178.4 million – a significant increase from the £156.8 million recorded between January and March.
Record-low interest rates continue to serve as one of the sector’s key drivers, with the average bridging loan for Q2 being issued at a monthly rate of 0.65% – slightly down from the previous all-time low of 0.71%.
Data from the latest Bridging Trends report also indicates that the most popular use for bridging finance in the UK is purchasing investment properties, accounting for a full 24% of all bridging loans used; though this was down slightly from the previous quarter when 26% of bridging loans were used for this purpose.
The second most popular use for bridging finance was funding property chain breaks, which accounted for 21% of all bridging loans issued.
A Significant Increase in Auction Property Purchases
The proportion of bridging loans being used to purchase properties at auction doubled in Q2, making up 4% of all bridging loan transactions (previously 2%). This is attributed to the growing competition on the UK housing market and the shared desire among investors and home buyers alike to pick up low-cost properties via alternative channels.
There was also a major increase in the number of regulated bridging finance issued during the second three months of the year. Regulated bridging loans accounted for 10% of the quota, up from just 5% in the three months prior.
Average loan completion times increased to 57 days compared to 53 days in the first quarter, while the average bridging loan value increased slightly from 54.5 % to 56.1%. The average bridging loan term remained unchanged at 12 months.
Speaking on behalf of bridging and development finance specialist at Brightstar, Stephen Watts said the impressive figures for the second quarter of 2022 came as no real surprise.
“The demand for property currently outweighs the number of suitable properties for sale to home buyers and investors, therefore, bridging finance is being increasingly sought to enable buyers to put themselves ahead of their competition,” he said.
“With recent statistics confirming on average, there are up to 29 potential buyers for each property on the market for sale, it’s not a shock to see such an increase in requirement for fast, short-term bridging finance.”
An Inevitable Slowdown to Come?
Echoing Mr Watts’ sentiments, Andre Bartlett, director of Capital B Property Finance, said that strong Q2 performance for the sector had been predicted.
“There may now be some pressure on lenders to increase pricing, but we must remember they are at their lowest and bridging still represents excellent value for the right client,”
“Lenders seem busier than ever, and completion timescales are slipping, and I feel this is a combination of staff shortages and the uplift in business. The industry is still well placed to provide much-needed assistance to clients over, what could be, some interesting times ahead.”
Elsewhere, Gareth Lewis, commercial director of MT Finance suggested that it was only a matter of time before bridging loan rates begin to increase and potentially take a toll on the record-breaking popularity of the market being seen right now.
“This trend has enabled lenders to create a competitive edge to try and gain market share. However, will we continue to see this in the coming months? I doubt it,” he said.
“Base rate increases and swap rate volatility has been ever present in 2022, but its impact has yet to be truly seen in the bridging sector, as it has throughout the mortgage market. As pressure continues to build and funding costs increase, I expect to see the start of movement in our sector in the coming months.”
