Bridging firms lent a record £278.8m in the first three months of the year driven by homeowners, data shows.
The figure is a 68% jump on the final quarter of last year, and a 30% lift on the previous record set in the third quarter of 2022, according to the quarterly Bridging Trends report commissioned by specialist lender MT Finance.
The study says: “Demand from residential homeowners was the main driver of bridging loan transactions in the first quarter of 2023, as uncertainty surrounding rising interest rates and risk appetite in the mortgage market persisted.”
It points out that the proportion of homeowners turning to bridge finance to prevent chain breaks in the period jumped to 25%, from 15% in the final quarter of last year.
However, demand from investors and landlords using bridging loans to buy properties slumped to a record low of 15% at the start of the year, from 26% in the final three months of 2022.
It says: “This suggests that in the wake of recent rate increases, landlords and property investors are waiting until interest rates become more consistent before they purchase new investment properties.”
Regulated bridging demand rose to 46.2% in the period from 43.8% in the previous quarter, its highest share since the first three months of 2021 when it hit 47.7%.
The report adds that this is “likely due to homeowners wanting to avoid post-mini-Budget disruption and take advantage of bridging’s rates and flexibility”.
The first three months of the year saw average monthly interest rates remain steady at 0.79%, says the report, “reflecting the instability felt by lenders and the mortgage market”.
It points out that despite this, the average loan-to-value ratio dropped to 54.7% in the period from 57.9% in the previous quarter.
The survey says: “This could be attributed to lenders taking a cautious approach to issuing high LTV products in the current climate.”
Demand for second charge bridging loans fell to 11.2% in the first quarter from 12.9% in the previous three months, its lowest level since the third quarter of 2021.
The report adds: “This could be attributed to the rise in chain breaks and homeowners taking advantage of the softer property market to move, rather than raising capital on their current properties.”
The average completion time of a bridging loan fell to 54 days in the period, down from 66 days reported in the previous three months — the quickest seen since the 53 days reported in the first quarter of 2022.
The average term for a bridging loan remains 12 months.
Clever Lending’s Matthew Dilks says: “It’s no surprise to see such continued growth in the use of regulated bridging for chain break purposes.
“We are seeing many brokers new to bridging who are using the product and our services for support, experience, and, for some, to do the advice also.
We’ve also experienced a notable increase in enquiries for regulated bridging from brokers with clients wishing to downsize, so it’s important that brokers consider the wider range of client circumstances such a product can help with.”