Latest Bridging Trends research has shown that the bridging loan sector continued to perform strongly in the second quarter of the year, with Bridging Trends contributors transacting a total of £178.4 million in bridging loans during the second quarter of the year – 22% more than in Q2 2021 (£146.5m), and up 14% on the previous quarter (£156.8 million).
Purchasing an investment property remained the most popular use of a bridging loan in Q2 – at 24% of total contributor transactions, falling slightly from 26% in the previous quarter. The second most popular use was to “chain break”– accounting for 21% of total transactions in Q2.
Continued shortage of stock means there has been no let-up in terms of pressure on buyers. With several purchasers competing for the same property in some instances, there is a need to move quickly.
The research claims that those who are not cash buyers are putting themselves ahead of the competition by turning to bridging finance for a rapid cash injection; further highlighted by the increase in bridging loans for auction purchases – doubling from 2% in Q1 to 4% in Q2.
However, regulated refinance saw the greatest shift in demand in Q2, jumping to 10% of total transactions from 5% in the previous quarter. This shift could indicate that more homeowners looked to enhance their properties in Q2, rather than move and compete in a busy market.
The busy property market has increased the appetite for bridging and has led to greater competition between lenders. Lender competition continued to drive bridging rates down to record lows in Q2, with the average monthly interest rate falling to 0.69% – down from the previous record low reported in Q1 (0.71%). Loan-to-values edged up slightly from 54.5% in Q1 to 56.1% in Q2.
Industry professionals, such as valuers and conveyancers, have also seen an increase in demand for their services from buyers working to tight deadlines. Average loan completion time figures rose to 57 days – up from 53 days in Q1.
The split between regulated and non-regulated bridging loans remained consistent with the previous quarter with regulated loans accounting for 43.3% of the market, down from 43.9% in Q1.
Meanwhile, second-charge loans accounted for an average of 16% of total market volume in Q2 – up from 12% in Q1.
The average term of a bridging loan remained at 12 months.
Stephen Watts, bridging and development finance specialist at Brightstar, said: “It’s no surprise to see 83% of Q2’s bridging loans being on a first-charge basis as the lending options for stand-alone second charges are fewer than they once were.
“It is also not surprising to see a 14% rise in bridging finance activity. 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. With recent statistics confirming, on average, that 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.”