By The latest figures from Bridging Trends show contributor gross bridging lending was £196.2 million in Q1 2024, as an increased number of business owners look for additional funding.
Key Points for Q1 2024:
- Gross contributor lending up 0.4%
- Demand for business funding doubles
- Proportion of second charge bridging loans hits three-year high
- Regulated bridging transactions jump to pandemic levels
Bridging Trends contributors reported £196.2 million in bridging loan transactions in Q1 of 2024, maintaining momentum from Q4 2023’s £195.5m.
Borrowers utilised bridging finance mostly to purchase investment assets in Q1, accounting for 21% of loans, down from 24% in Q4 2023. However, the demand for business funding saw the most significant increase, nearly doubling from 8% in Q4 2023 to 15% in Q1 2024 – the highest it has been since Q4 2021. This rise could potentially be attributed to business owners seeking market certainty to grow their companies.
Preventing a chain break was the second most popular purpose for obtaining bridging finance in Q1, rising to 19% from 16% in the previous quarter.
With conveyancing delays leading to protracted home purchase transactions and the potential for a greater number of broken chains, more homeowners are turning to bridging to secure the home they want to buy. This has seen the number of regulated bridging loans increase from 44.2% in Q4 2023 to 51% in Q1 2024 – the highest it’s been since Q3 2020’s 53%.
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.
The increase in regulated bridging also likely influenced the drop in the average monthly interest rate, which dropped from 0.91% in Q4 2023 to 0.89% in Q1 2024.
Additionally, a growing number of borrowers turned to bridging finance to leverage equity in their assets in the first quarter of the year, as demand for second charge bridging reached a three-year high of 21.3% in Q1, compared to 11.6% in Q4 2023, and 22.2% in Q1 2021.
Elsewhere, the average loan-to-value (LTV) came it at 60% in Q1, rising fractionally from 59.3% in Q4 2023. The average completion time for a bridging loan remained at 58 days in Q1.
For the tenth consecutive quarter, the average term was 12 months.
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 Finance and UK Property Finance. The data for top broker criteria searches is supplied by Knowledge Bank.
William Lloyd-Hayward, Group Chief Operating Officer & MD at Sirius Finance comments:
“The latest Bridging Trends data is yet another reminder of the resilience and versatility of the bridging sector. Overall lending continues to grow, and the diversity of this growth is striking. Demand from businesses for short-term property funding, for example, has doubled, while homeowners are increasingly turning to bridging, with the regulated part of the market jumping to pre-pandemic levels. At the same time, second charge bridging loans have hit a three-year high.
“The overall picture demonstrates that more brokers and borrowers are recognising bridging as a flexible solution to meet a wide variety of capital challenges – and this is a positive sign for the future growth of the sector.”
Chris Whitney, Head of Specialist Lending at Enness Global comments:
“After seeing the notable rise in loans being used for business purposes, I shared the data with our Corporate Lending Team, who were not at all surprised. With lenders tightening criteria, unsecured business loans are much harder to get this year. They are also taking much longer to implement and are more expensive – I was recently shown one example at 22% per annum. Therefore, it makes sense for business owners looking to support their business to take a second charge loan on a property. Additionally, entrepreneurs are finding that when they are coming to renew their facilities, they no longer meet the stricter criteria and are forced to refinance using a different method. We expect this sector to become even more restrictive before it gets better – I think we will see this trend continue as we move through the year.
“Investment purchases being the main reason for taking out a bridging loan is a positive indicator for the economy, possibly fuelled by the expectation of interest rate falls this year. It is good to see re-bridges come down, indicating borrowers are choosing a sensible term. The cost of funds also going down makes bridging loans an ongoing cost-effective way of funding in a relatively high-interest rate environment. Seemingly speed is becoming less important to many at 58 days, which I would like to see come down in the next quarter.”
Gareth Lewis, Managing Director at MT Finance comments:
“With momentum maintained in the first quarter, it’s clear that borrowers are continuing to turn to bridging lenders thanks to the certainty, speed, and flexibility we are offering them. Second charge bridges in particular have come to the forefront and show how brokers are working with their clients to maximise the equity in their properties without disturbing their current mortgages. I would not be surprised if this jump in second charges is also linked to the rise in regulated bridging, allowing homeowners to take out a cross charge and secure their dream home.
“What happens in the next quarter in the run-up to the election is hard to guess but regardless of what happens, I know I speak for everyone in the specialist finance industry when I say we remain committed to our clients and delivering the best outcome as quickly as possible.”
To view the Bridging Trends Q1 2024 infographic, please visit www.bridgingtrends.com
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