Bridging loan transactions reach three-year high of £716m in 2022

According to MT Finance’s Bridging Trends report for 2022, the total value of transactions completed by contributors was a 14 per cent jump on the £626.7m transacted in 2021. All four quarters of 2022 reported annual growth. 

Transactions peaked in Q3 at £214.6m which was the highest level of loans completed during a single quarter since the report launched in 2015. 

The average annual interest rate fell to 0.73 per cent, down from 0.76 per cent in 2021 and 0.79 per cent in 2020. This was the lowest level recorded. 

In Q4 alone, average rates rose following the mini Budget to 0.79 per cent, up from 0.73 per cent in Q3. 

The average loan to value (LTV) stayed at 57 per cent, which MT Finance said indicated that the market maintained a responsible approach to lending. 

Use of bridging 

Using a bridging loan to fund an investment purchase was the most popular use in 2022, accounting for 23 per cent of activity. However, this was down on the previous year’s 25 per cent share. 

The use of loans for unregulated refinance rose from six per cent to 11 per cent annually, which MT Finance said hinted at property investors and landlords looking to maximise rental yield by improving their portfolio rather than expanding. 

Some 44 per cent of loans were taken out by homeowners, up from 40.8 per cent in 2021. This coincided with the use of bridging loans to prevent chain breaks, which rose from 18 per cent to 20 per cent. 

Second charge bridging loans accounted for 13.7 per cent of the market in 2022, down from 14.8 per cent which was a record low according to the data. It was suggested that this might be down to people preferring to move home and purchase new properties rather than release equity. 

The average loan term stayed flat at 12 months while the average completion time rose from 52 days in 2021 to 59 days last year. 

Bridging to remain a viable option 

Dale Jannels, managing director of Impact Specialist Finance, said: “With the lack of housing stock unlikely to change in 2023, along with continued affordability challenges for borrowers due to increased interest rates, the use of regulated bridging to fund onward purchases before their current home is sold will remain a viable option. I do not expect to see a reduction in its use anytime soon.” 

Jannels said he expected to see the rising trend in unregulated finance continue with landlords making houses in multiple occupation (HMO) conversions and looming EPC regulations. 

He added: “This will lead to more improvements being made to improve energy efficiency in older properties especially.” 

Chris Whitney, head of specialist lending at Enness, added: “The 2021 versus 2022 comparison doesn’t really give us any surprising data. Both years had their challenges for different reasons in terms of the macro economy. However, the numbers seem to indicate that borrowers were very much in a ‘keep calm and carry on’ mentality. I think we saw lenders (in the main) take the same view and adapt to things like cost of funds increases swiftly. Still modest LTVs overall, indicating responsible borrowing and lending. 

“The healthy increase in borrowing was nice to see and confirms what we already know – that the bridging finance market has matured, is here to stay, and a tool increasingly used by borrowers as a matter of course rather than just by exception. 

“2023 will, I am sure, also have its challenges but the mood in the market as we kick the year off seems hugely positive.” 

Sam O’Neill, head of bridging at Clifton Private Finance, said: “It’s good to see faith in the bridging market back to pre-pandemic levels. Bridging loans plugged a large gap during Covid-19 for stamp duty cuts, opportunities due to market uncertainty, along with a whole host of other reasons. The market seems to have certainly weathered the storm in spite of a generally gloomy economic state.  

“The bridging finance sector has leapt further into the spotlight over the past few years and hopefully, with ever-increasing confidence in lenders and the products they provide, bridging finance will become a mainstay in the property funding process for years to come.”