Preventing a chain break drives demand in 2023
The annual Bridging Trends data is in and reports that a record £831 million in bridging loans were transacted in 2023 by contributors*. We’ve broken down what you need to know about the latest stats.
buyers turning to bridging finance to prevent chain breaks
As borrowers continued to face uncertainty in the mainstream mortgage market after 2022’s mini-Budget, an increasing number of borrowers turned to bridging finance to save their purchases. Subsequently, preventing a chain break was the most popular use of a bridging loan in 2023, increasing from 20% in 2022 to 22%. This surpassed funding the purchase an investment asset – 2022’s most popular use of bridging loan – which fell from 23% to 20% year on year. Elsewhere, demand for auction finance, regulated refinance and re-bridges increased slightly compared to 2022.
regulated lending’s popularity increases
A cocktail of fluctuating mortgage approvals for house purchases, rising interest rates and product withdrawals saw many homeowners turn to bridging finance. As a result, regulated bridging extended its market share in 2023, rising to 46.3% of all transactions, up from 44% in 2022 and 40.8% in 2021.
The uptick in regulated lending – and property purchases in general – could be why second charge bridging loans fell from 13.7% in 2022 to 10.7% in 2023, as borrowers pressed pause on releasing equity from their existing assets. It’s also worth noting that this is a record low since Bridging Trends began in 2015.
external factors impact the industry
A combination of high inflation and rising base rates took their toll on the bridging finance industry with lenders having to adjust their own interest rates accordingly. This saw the annual average interest rate increase from 0.73% in 2022 to 0.87% in 2023, the highest yearly figure since 2015’s 0.91%. Despite this increase, the average loan-to-value remained static at 57%. This is encouraging to see as it shows that borrowers remain cautious when it comes to the debts they are taking on.
how MT Finance can help
At MT Finance we remain committed to supporting landlords and investors. Our bridging loans have been designed to be fast and flexible. We know that each case is unique and we will always consider applications that fall slightly outside of our published criteria. Borrowers also have the freedom to exit their bridging loan at any point after one month without incurring any exit fees or early repayment charges (see types of bridging loan fees). To find out more about our bridging loans, simply get in touch here and a member of our team will be in touch with you as soon as possible.