This morning, the Q1 Bridging Trends data was released and revealed a consistent performance of gross bridging lending in Q1 2024 – a strong indicator of a stable market environment that suggests both lenders and borrowers are maintaining a level of confidence in the industry.
MT Finance compiles Bridging Trends, a quarterly infographic that brings together data from 12 of the UK’s leading finance brokers. In Q1, the contributors transacted £196.2 million in bridging loans, maintaining momentum from Q4’s £195.5 million.
Borrowers prioritising speed and certainty
While there have been less economic fluctuations in 2024 than 2023, the base rate remains at a 16-year high, and many high street lenders continue to exercise caution. This has seen borrowers turn to bridging finance to secure the finances they need.
It’s no surprise that funding an investment purchase remained the most popular use of a bridging loan in Q1, although it dropped slightly from 21% in Q4 2023 to 19% in the first quarter. However, demand for business funding nearly doubled, rising from 8% in Q4 to 15% in Q1. There could be several factors contributing to this surge of interest among business owners. Some are embracing the current higher interest rate environment, while others are seeking stability in the market to take their companies to new heights with confidence. Whatever the motivation is, it’s clear that businesses are ready to take on new challenges and seize opportunities.
Conveyancing delays sees regulated bridging extend its market share
Another significant increase was observed in regulated bridging, which rose from 44.2% of all bridging transactions in Q4 to 51% in Q1. This is a sharp rise from the previous quarter’s 44.2% and the highest it has been since Q3 2020 when it hit 53%.
It seems like conveyancing delays are wreaking havoc on home purchases, causing hold-ups that have led to more and more homeowners seeking bridging loans to make purchasing their dream homes a reality. Nearly one-fifth of all bridging loans in Q1 were used to prevent chain breaks, a notable increase from the previous quarter’s figure of 16%.
Data provided by Knowledge Bank also revealed a demand for regulated bridging as it remained the top criteria search made by UK bridging finance brokers in Q1.
Savvy borrowers turning to second charges to unlock equity
More borrowers are also leveraging the equity they have in their properties to raise funds, with second charge bridging loans hitting a three-year high of 21.3% in Q1, compared to 11.6% in Q4 and 22.2% in Q1 2021. This has given borrowers more breathing space to undertake works, raise business finance and so on, all without disturbing their current mortgage rate.
Interest rates begin to dip
Another noticeable trend was the average monthly interest rate on a bridging loan falling – dropping from 0.91% in Q4 to 0.89% in Q1. This is likely due to the continued stabilisation of the Bank of England base rate and the increase in regulated bridging lending.
Elsewhere, the average loan-to-value (LTV) came it at 60% in Q1 from 59.3% in Q4, showing that borrowers remain cautious about overburdening themselves. Meanwhile, the average completion time for a bridging loan remained static at 58 days while the average term was also the same, coming in at 12 months for the tenth consecutive quarter.
Solutions form MT Finance
As borrowers’ needs continue to change, we remain committed to supporting your clients, regardless of external factors. Available for a variety of different purposes, both our unregulated bridging loans and regulated bridging loans are fast and flexible and we are driven by a desire to achieve the best possible outcome for your client.
Residential, commercial, and semi-commercial properties are accepted as security and we consider many income structures including clients who are self-employed, in a partnership or own a limited company. We will also take a view on your more on complex cases – cross charges, second charges and refinances are all options we can assist with.
What’s more, we know that when your client requires a bridging loan, time is of the essence. That’s why we have recently implemented automated valuation models (AVMs) into our offering – we accept AVMs on both regulated and unregulated bridging loans.
If you have a query that you’d like to discuss then we’d love to hear from you. Either drop us an email or submit an enquiry and we’ll get back to you shortly.
*Bridging Trends combines bridging loan completions from several specialist finance packagers operating within the UK bridging market: AFIG, Brightstar Financial, Capital B, Clever Lending, Clifton Private Finance, Complete FS, Enness, Impact Specialist Finance, LDNfinance, Optimum Commercial, Sirius Group, and UK Property Finance. The data for top broker criteria searches is supplied by Knowledge Bank.