Bridging loan transactions reach record high of nearly £215m in Q3

According to the Bridging Trends report for the period, this was the third quarter in a row to see the value of transactions increase and the total was the highest since records began in 2015. 

Sam O’Neill, head of bridging at Clifton Private Finance, said the gross lending figure would be an “interesting benchmark” for the next quarter in light of the uncertain market. 

He added: “With uncertainty comes opportunity, and we are already seeing investors looking to capitalise on under market value transactions caused by panic-selling vendors.” 

O’Neill said he expected investment purchases to rise over the next few months, but he would be keeping an eye on re-bridging figures. 

“Current bridging loans nearing their term’s end are subject to more stringent criteria on mortgages and an uncertain buying and selling market. Will more lenders who don’t currently consider re-bridging see this as an opportunity? Or a necessity to keep pace with other lenders and the demands of the market?” he said. 

Bridging to avoid property chain breaks 

Taking a bridging loan to prevent a chain break was the most common use of the product, making up 22 per cent of transactions, up from 21 per cent in Q2. 

Stephen Watts, bridging and development finance specialist at Brightstar, said: “Following the base rate rises we’ve seen throughout this year and mortgage interest rates increasing across the industry, it’s no surprise that chain-break bridging is the biggest use of funds for the quarter. 

“Borrowers that have had mortgage products withdrawn on them with little or no notice or have lost their sale due to their buyers no longer fitting mortgage affordability criteria, would then turn to short-term funding solutions to ensure their purchase can still go through as planned. It will be interesting to see how this impacts on next quarter’s data.” 

Bridging for investment 

Using bridging to purchase an investment property slipped from the most popular use to the third most popular, accounting for 16 per cent of loans compared to 24 per cent in Q2. The report said this was the lowest use of bridging for investment and put it down to the uncertain economic environment. 

Loans for business purposes nearly doubled from a share of six per cent to 11 per cent, while auction finance rose from five per cent to eight per cent. 

The average monthly rate for a bridging loan rose to 0.73 per cent in Q3, the first increase this year. This was up from a record low of 0.69 per cent in Q2. 

Mini Budget to have effect on bridging in Q4

Gareth Lewis, commercial director at MT Finance, said: “Considering the volumes we have seen in Q3, bridging finance clearly continues to be a useful tool for homeowners and investors alike. What has been interesting is the drop-off in bridging being utilised for investment purchases, which is likely due to buyers taking stock of the current market. While it’s too early for us to really feel the impact of September’s mini Budget, I expect this will be more visible in Q4.  

“As predicted in Q2, interest rates have started to slowly rise to 0.73 per cent but it is worth noting they are virtually on a par with Q3 in 2021 (0.72 per cent). I would not be surprised if interest rates continue to rise, and investors remain cautious.” 

The average loan to value of a bridging loan came to 59.6 per cent, higher than the average of 56.2 per cent in the previous quarter. 

Regulated bridging accounted for 45.2 per cent of the market share, an increase from 43.3 per cent in Q2. This was also the highest proportion of regulated bridging transactions since the first quarter of last year. 

The average completion time rose from 57 days to 60 days.