investor demand for bridging finance jumps in Q2 2023
According to the latest Bridging Trends data, £165.7 million in bridging loans was transacted by contributors* during the second quarter of 2023. This is a 40.6% drop from Q1’s record-breaking £278.8 million and the lowest quarterly figure since Q1 2022 (£156.77 million).
demand from investors and landlords rebounds
After plummeting to 15% in Q1, demand for bridging loans to fund investment purchases surged to 22% in the second quarter – a rise that’s likely due to investors and professional landlords taking advantage of a slower property market to purchase assets at a reduced rate. Despite the cost of building materials remaining higher than at the start of the year, the percentage of heavy refurb bridging loans rose in Q2 to 13%, up from 10% in Q1.
affordability remains a key consideration
Considering that we have seen 14 consecutive base rate hikes since December 2021, it is no surprise that the weighted average monthly interest rate on a bridging loan rose from 0.79% in Q1 to 0.84% in Q2 as the increases continue to impact bridging lenders. What was encouraging to see is that despite this increase, the average loan-to-value is still well under 60%, although there was a small jump from 54.7% in Q1 to 56.9% in Q2. This shows that borrowers were careful about not overburdening themselves, a reason which likely contributed to the drop we’ve seen in total contributor transactions.
Second charge bridging loans also experienced a dip, falling for the fourth quarter in a row from 11.2% in Q1 to 10.7% in Q2.
regulated bridging increases market share
While there had been some suggestions that demand for regulated bridging loans would fall as property sale exits are squeezed by lower sale values being achieved, this wasn’t the case in Q2. In fact, regulated bridging loans accounted for 48.7% of all transactions in Q2, up from 46.2% in Q1. This is the highest figure we’ve seen since Q3 2020’s 53% when we were in the midst of the stamp duty holiday. It also translated into preventing a chain break being the most popular use of a bridging loan in Q2 at 24%, despite a very slight fall from 25% in Q1.
how MT Finance can help
Here at MT Finance we are here to support the landlord and investor community. Our bridging loans have been tailored to meet your needs and all of them can be exited at any point after one month without incurring any exit fees or early repayment charges. There are also multiple options to repay interest, including serviced, retained – meaning no monthly payments – or part and part. If you would like to find out more about our bridging loans, get in touch with us today. We can be contacted online, via email or on 0203 051 2331.