Bridging rates fall to historic lows as lending rises in Q1

According to MT Finance’s bridging trends report, loans completed during the first quarter were 8.5 per cent up on the same period in 2021 and 7.8 per cent higher than Q4 last year. 

Simultaneously, the average monthly interest rate for a bridging loan fell to 0.71 per cent, a historic low, and was down on 0.77 per cent in Q4. 

MT Finance said this was primarily due to the boost in regulated lending over the past three months, which resulted in a demand for regulated bridging loans for the first time since Q1 last year. 

The number of loans conducted by the report’s contributors rose to 43.9 per cent during the period, compared with 36 per cent in Q4 2021. 

The average loan to value (LTV) of a loan was 54.5 per cent compared to 57.3 per cent in the previous quarter. MT Finance suggested the lower LTVs could be due to slower-rising property asking prices. 

Bridging use in Q1

The most popular use for a bridging loan in Q1 was to purchase a property, making it the fourth month in a row that most people used bridging loans for this purpose. Some 26 per cent of loans were used to buy an investment property, down on Q4 2021’s 29 per cent. 

The second most popular reason was to fund a chain break, accounting for 23 per cent of completions, up from 18 per cent in the previous quarter. 

Bridging loans for business purposes saw the sharpest drop in demand with total transactions falling from 15 per cent to 10 per cent.  

The volume of second charge bridging transactions also fell to 11.9 per cent of all loans from 17 per cent in the previous quarter and 22.2 per cent in the same period the year before. 

The average term remained at 12 months and completion time decreased to 53 days in Q1, from an average of 56 days in Q4 2021. 

The report combines loan completions from specialist finance packagers in the UK including LDNfinance, Brightstar Financial and Impact Specialist Finance. 

Kimberley Gates, head of corporate partnerships at Sirius Property Finance, said: “It comes as no surprise that bridging loan transactions have increased again from the previous quarter – the property market continues to be turbulent for a variety of well-publicised reasons, so borrowers are looking for increasingly innovative ways to structure their debt. 

“The stigma surrounding bridging also continues to subside as more investors, developers and homeowners are starting to see it as a useful tool for realising their real estate goals and no longer as a last resort.” 

Sam O’Neill, head of bridging at Clifton Private Finance, added: “The increase in chain break transactions and regulated bridging is another positive sign. An increasing number of homeowners are seeing bridging finance as something they can confidently rely on and trust as a viable financial product.  

“When looking for reassurance that the industry is going in the right direction, we can’t ask for more positive feedback than that.”