Bridging rates hit highest level since 2015

Rates rose from 0.84 per cent in the second quarter of 2023 to 0.94 per cent in Q3 – the highest level reported since Bridging Trends launched in 2015.

The increases in rates are “in line with the rest of the finance marketplace, which has experienced a variety of cost hikes”, according to Donna Wells, managing director at master broker Envelop.

Lending rebounds

The report also showed a 15.3 per cent increase in bridging transactions from the 12 specialist packagers that input into the quarterly survey.

They transacted a total of £191m in bridging loans during the third quarter, up significantly from £165.7m in Q2.

Completion times also ticked up, averaging 62 days in the third quarter, up from 58 days in Q2.

Matthew Dilks, bridging and commercial specialist at Clever Lending, said: “The demand for regulated bridging remains high due to broken chains, as well as people wishing to downsize.”

Chris Borwick, director of Capital B Property Finance added that the sector was bucking the wider market trend.

He said: “Against a backdrop of mortgage approvals falling to their lowest level since January, it is heartening for those operating in the specialist sector to see some good news in the form of bridging lending volumes jumping by 15.3 per cent in Q3.”

Wells agreed: “The current residential mortgage market is in a state of flux due to mortgage approval levels dropping significantly.

“However, there are still a number of potential buyers who are looking to secure their next home move quickly, and this has been reflected in the number of regulated bridging enquiries.”

Reasons for finance

The Bridging Trends Report found that preventing a chain break remains the most popular use of a bridging loan, accounting for 22 per cent of all transactions.

The number of bridging loans for refinancing purposes also increased for both regulated and unregulated loans, at 12 per cent and 10 per cent respectively.

However, bridging loans for heavy refurbishment fell significantly in the last quarter, to a three-year low.

Just seven per cent of loans were for heavy refurbishment, compared to 13 per cent in Q2, as developers became hesitant to take on costly renovations due to house price falls.

Funding auction purchases accounted for 10 per cent of all bridging loans.