bridging loan transactions reach record high in Q1 2023
According to the latest Bridging Trends data, £278.8 million in bridging loans was transacted by contributors during the first quarter of 2023. An all-time high since Bridging Trends launched in 2015, this is a 30% increase on the previous record (£214.7 million in Q3, 2022) and a 68% jump on Q4 2022 (£166.3 million).
homeowners driving demand for bridging loans
Continued uncertainty in the mortgage market saw many homeowners turn to bridging lenders to complete existing purchases. This was demonstrated by soaring demand for chain break loans which nearly doubled from 15% in Q4 to 25% in Q1.
This translated into demand for regulated bridging increasing from 43.8% in Q4 to 46.2% in Q1, its highest share since Q1 2021 (47.7%). As well as preventing chain breaks, this is likely to have been driven by homeowners keen to avoid any post-mini-budget disruption as well as wanting to move quickly and take advantage of bridging’s rates and flexibility.
Meanwhile, using a bridging loan to purchase an investment asset plummeted from 26% in Q4 to 15% in Q1. This is a new record low and indicative of the sentiment among many investors and landlords following the recent rate hikes. Instead of being a cause for concern however, there is a sense that those who are not in a rush to purchase new investment properties are being savvy and waiting until interest rates become more stable.
interest rates remain stable
Average monthly interest rates remained consistent at 0.79% in Q1 compared to Q4, indicating instability felt by lenders and the wider mortgage market.
Despite static interest rates, the average loan-to-value dropped from 57.9% in Q4 to 54.7% in Q1. As well as showing that a sensible approach to lending is being taken, it could also be due to lenders wary of issuing high LTV products in the current climate.
completion time drops
The average completion time fell from 66 days in Q4 to 54 days in Q1. This is the lowest number we’ve seen since the 53 days recorded in Q1 2022 and suggests the industry is dealing well with the increased demand.
Second charge bridging loans decreased from 12.9% in Q4 to 11.2% in Q1, the lowest they have been since Q3 2021. This could be down to a variety of factors, including the increase in chain breaks as well as homeowners taking advantage of a softer property market and looking to move, rather than raising capital on current properties. This is also reinforced by the drop in bridging loans being used for heavy refurbs, dropping from 14% in Q4 to 10% in Q1.
how MT Finance can help
Despite the uncertainty felt in recent months, we remain committed to supporting borrowers with our selection of bridging loans. Our ability to move quickly while delivering the best possible service ensures every one of our loans is as fast, flexible and stress-free as possible.
* Bridging Trends combines bridging loan completions from several specialist finance packagers operating within the UK bridging market: Adapt Finance, Brightstar Financial, Capital B, Clever Lending, Clifton Private Finance, Complete FS, Enness Global, Impact Specialist Finance, LDNfinance, Optimum Commercial, Sirius Group and UK Property Finance.