Homebuyers Utilising Bridging Loans to Overcome Unsettled Market as Lending Climbs 20%

Homebuyers have continued to utilise bridging loans in an increasingly unsettled market, with total lending up both quarterly and annually, with the driving reason being the ability to overcome a chain break during the final stages of a transaction.

The latest data shows that £214.7m was lent via the bridging sector in the third quarter of last year, up 20.3% vs the previous quarter and 12.9% more compared to the same period the previous year.

This increase comes despite the fact that numerous base rate increases from the Bank of England have pushed the average monthly interest rate on a bridging loan to 0.73%, the highest level seen in 2022.

With the property market becoming increasingly unsettled, it’s no surprise that the ability to overcome a chain break when buying was the primary reason homebuyers have been increasingly reliant on bridging loans.

Bridging loans due to chain breaks have also seen the largest annual increase, up 9% versus the same quarter last year.

However, it’s those utilising bridging loans for business purposes, auction purchase and unregulated finance that have driven the largest uplift in activity on a quarterly basis, up 5%, 3% and 2% respectively.

With bridging loans providing a quick, flexible route when securing finance in a turbulent market, Apex Bridging estimates that a total of £733.2m could be lent via the sector come the end of 2022.

This will not only be by far the highest sum seen since the start of the pandemic, but it would also sit marginally above the 2019 total of £732.7m.

Chris Hodgkinson, Managing Director of Apex Bridging, the bridging finance specialists responsible for the analysis, commented:

“The landscape has become increasingly difficult regardless of whether you’re purchasing as a homebuyer or investing for business purposes.

As interest rates have climbed, many have found that when it comes to borrowing there simply aren’t the same deal on the table as there were previously.

This has proved particularly problematic within the residential sector, with chain breaks being the predominant reason buyers are turning to bridging loans in order to rescue an otherwise scuppered transaction.

While the benefits of bridging come with the compromise of higher rates, this hasn’t acted as a deterrent and we expect to see the sector finish strongly once the scores are on the doors for 2022 as a whole.”

Table shows the estimated total level of bridging lending in 2022*
Category	Variable	2019	2020	2021	2022 est
Total lending	Total gross lending (£m)	£732.7	£455.0	£626.7	£733.2
*2022 estimate based on existing data for 2022 and a Q4 estimate of £183.3m from Apex Bridging

Table shows the latest data on briding lending broken down by each area and the quarterly and annual change
Category	Variable	Q3 2022	Q change	Annual change
Total lending	Total gross lending (£m)	£214.7	20.3%	12.9%
Average charge	First charge	86.2%	2.6%	-3.8%
Average charge	Second charge	13.8%	-2.6%	3.8%
Interest rate	Average monthly interest rate	0.73%	0.04%	0.01%
Completion time (application processing time)	Average completion time (days)	60	3	7
Transactions	Regulated	45.2%	1.9%	7.5%
Transactions	Unregulated	54.8%	-1.9%	-7.5%
LTV	Average LTV	59.6%	3.5%	-0.6%
Loan term	Average term (months)	12	0	1

Table shows each bridging loan purpose, what proportion of total loans they account for and the quarterly and annual change
Bridging loan purposes	Proportion of all	Q change	Annual change
Chain break	22%	1%	9%
Unregulated refinance	13%	2%	6%
Business purposes	11%	5%	2%
Regulated refinance	10%	0%	1%
Other finance	3%	-2%	0%
Refurbishment (heavy)	11%	-2%	-1%
Re-bridge finance	6%	1%	-2%
Auction purchase	8%	3%	-3%
Investment purchase	16%	-8%	-12%