Bridging Finance Growth Driven by Investment Property Buys
Investment property acquisitions have emerged as the leading driver for bridging finance in the UK, according to the latest Bridging Trends quarterly index. Data compiled by MT Finance from specialist finance packagers indicates that investment purchases constituted 23% of all bridging transactions during the third quarter, a notable rise from 18% in the previous three-month period.
Total lending volume among contributors reached £181.8 million between July and September, marking a 5% increase compared to the second quarter’s £173.1 million. Despite this quarterly growth, the figure remains 13.2% lower than the £209.4 million recorded during the same timeframe last year. Within the sector, unregulated lending increased to 55% of the total, up from 52% previously.
Financial conditions for borrowers showed signs of improvement, with the average monthly interest rate dropping to 0.77% from 0.81%, representing the fourth consecutive quarterly decrease. Efficiency also improved, as average completion times fell by five days to 41 days. Additionally, the average loan-to-value ratio rose from 55% to 59%, while the average loan term held steady at 12 months. First-charge bridges now account for 87% of lending, up from 78%, while second-charge loans decreased to 13%.
Conversely, heavy refurbishment projects saw a decline, dropping from 10% to 6% of the market, likely due to persistent elevated building costs. Industry experts suggest that the uptick in speed and competition among lenders is facilitating this shift toward investment-led, first-charge lending. While bridging finance is increasingly utilized as a strategic tool for investors needing to act quickly, the year-on-year volume data suggests that caution persists within the broader market.
Why it matters
For real estate investors and professionals, the shift toward faster, higher-leverage bridging finance indicates a strategic pivot toward speed in competitive markets, despite ongoing caution regarding total lending volumes.
FAQ
What is the primary use of bridging finance in the UK currently?
Investment property purchases have become the primary use, accounting for 23% of bridging transactions in the third quarter.
How did interest rates and completion times change in the third quarter?
The average monthly interest rate fell to 0.77% from 0.81%, and average completion times dropped by five days to 41 days.
What happened to heavy refurbishment bridge loans?
Heavy refurbishment bridges declined from 10% to 6% of the market, reflecting the impact of elevated building costs.
Source: PropertyWire. See the original source for full details.
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