According to the latest Bridging Trends report, this is also 14 per cent more than Q1 where bridging loan activity was pegged at £156.8m.

The report also noted that average monthly interest rate had fallen to 0.69 per cent, which is down from previous record low of 0.71 per cent recorded last quarter.

It continued that buying an investment property was the popular use of a bridging loan, comprising 24 per cent of total contributor transactions. This is down slightly from 26 per cent in the previous quarter.

Chain break was the second most popular use, making up 21 per cent of transactions in the period.

Auction purchases doubled from two per cent to four per cent in Q2, which the report attributed to shortage of stock leading to more competition and borrowers using it for a rapid cash injection.

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Regulated refinance saw a big jump as well, doubling from five per cent in Q1 to 10 per cent in Q2. The report said this could show that homeowners are looking to enhance their properties rather than trying to move in a competitive market.

The average loan to value rose slightly from 54.5 per cent in Q1 to 56.1 per cent in Q2.

Average loan completion time increased from 53 days in Q1 to 57 days in Q2. The report said this could be due to increased demand compressing buyer timelines and putting increased pressure on valuers and conveyancers.

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

The report said that the split between regulated and non-regulated bridging was consistent with previous quarters, with regulated comprising 43.3 per cent of the market.

Second charge loans accounted for 16 per cent of total market volume during the period, up from 12 per cent in the prior quarter.

 

Rise in bridging activity not a surprise but low pricing may be short-lived

Stephen Watts, bridging and development finance specialist at Brightstar, said that it was “no surprise” that first charge was the dominant bridging loan option as lending options for stand-alone second charge were “fewer than they once were”.

He continued that it was also not surprising to see a 14 per cent 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, 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,” Watts added.

Andre Bartlett, director of Capital B Property Finance, agreed that it was not a surprise to see the uplift in bridging activity especially in the regulated refinancing.

He added: “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.”

Gareth Lewis, commercial director of MT Finance, said that the bridging market had been “fiercely competitive” in recent times which had led to rate cuts and bespoke pricing.

“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.

“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,” Lewis noted.