Bridging Lending Bounces Back in Q3 2023

Contributors to a quarterly specialist finance publication have reported a 15.3 per cent increase in bridging loan transactions, totalling £191m, during the third quarter of 2023. 

And they says that this rise from Q2's £165.7m highlights how borrowers are utilising the product’s certainty and flexibility in the current climate.

Amid the uptick in lending volume, there was a noticeable shift in the average monthly interest rate - jumping from 0.84 per cent in Q2 to 0.94 per cent in Q3. 

This is the highest reported since the publication - Bridging Trends - launched in Q1 of 2015 when it hit 0.95 per cent, demonstrating how the current high-interest environment and the base rate hikes have affected the sector. 

The average loan-to-value continued to sit comfortably under the 60 per cent mark although borrowers may be borrowing more due to lower valuations caused by a softening in house prices. 

Preventing a chain break remained the most popular use of a bridging loan, at 22 per cent of total transactions in Q3. Meanwhile, property owners and developers became hesitant to take on costly renovations in the third quarter due to the slowing of house price growth as demand for bridging loans to finance heavy refurbishment projects plummeted from 13 per cent in Q2 to just seven per cent in Q3 - the lowest it has been since Q4 2020.

Funding an auction purchase accounted for 10 per cent of all bridging loans in Q3, increasing from six per cent in Q2. The number of bridging loans for refinancing purposes also increased for both regulated and unregulated, at 12 and 10 per cent respectively.

Demand for second-charge bridging loans dropped for the fifth consecutive quarter, falling from 10.7 per cent in Q2 to 10.0 per cent in Q3 and after two quarters of extending its market share, demand for regulated bridging decreased from 48.7 per cent in Q2 to 46.1 per cent in Q3. 

However, ‘regulated bridging’ was the top criteria search made by brokers on Knowledge Bank's system in Q3, replacing ’minimum loan amount’. 

The traditional summer lull likely caused the average bridging loan completion time to increase from 58 days in Q2 to 62 days in Q3. This trend has been observed in previous third quarters as well, such as in Q3 2022 where it increased to 60 days from 57 days in Q2 2022.

The average term of a bridging loan remained steady at 12 months.