According to the latest Bridging Trends figures from MT Finance, the latest bridging figures are a record since the report started in 2015, and are up by 30 per cent on the previous high of £214.7m in Q3 2022.
It added that this is also a 68 per cent increase on the prior quarter of £166.3m.
The report continued that demand from residential homeowners was the main driver for bridging loans, with uncertainty around interest rates and risk appetite in the mortgage market continuing.
The use of bridging loans for chain break nearly doubled from 15 per cent in Q4 2022 to 25 per cent in Q1 2023.
Bridging loans for investment purchase contracted from 26 per cent in the prior quarter to 15 per cent in the first quarter of the year.
The report noted that this contraction could show that recent rate increases are meaning that landlords and property investors are waiting for interest rates to become “more consistent” before buying a new property.
Rebridge finance grew slightly from six per cent in Q4 2022 to 10 per cent in Q1 2023.
Auction purchase, business purposes, heavy refurbishments, regulated finance and unregulated finance stayed roughly the same.
‘Cautious’ lender appetite leads to lower LTV
The report said that around 88.8 per cent of bridging loans were first charge, with 11.2 per cent coming from second charge.
The latter is the lowest since Q3 2021 and could be attributed to the growth in chain breaks and homeowners “taking advantage of the softer property market to move, rather than raising capital on their current properties”.
The average monthly interest rate was in-line with the prior quarter at 0.79 per cent and the average completion time was 54 days, down from 64 days in Q4 2022.
The average loan to value (LTV) dropped from 57.9 per cent in Q4 2022 to 54.7 per cent in Q1.
The report noted that this could be attributed to lenders taking a “cautious approach” with issuing higher LTV products in the current financial climate.
The report added that 53.8 per cent of transactions were unregulated, and 46.2 per cent were regulated. This is similar to 56.2 per cent unregulated and 43.8 per cent regulated recorded in Q4 2022.
The average term was 12 months, which is in line with the prior quarter.
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