Annual contributor gross lending up by 16%
The UK’s bridging loan sector saw a significant uptick in 2023, with Bridging Trends contributors facilitating a record £831 million in loans, marking a 16% increase from the previous year’s £716.2 million.
The surge began in the first quarter, when contributors executed £278.8 million in loans, the highest for any quarter, driven by borrowers seeking alternatives amid the mainstream mortgage market’s instability following the 2022 mini budget.
Despite a slowdown in the second quarter, where loan transactions dipped to £165.7 million due to borrower caution in the face of rising inflation and mortgage rates, the latter half of the year delivered a steady increase, culminating in £191 million in the third quarter and £195.5 million in the final quarter.
MT Finance’s Bridging Trends aggregates data from a number of UK bridging finance specialists: 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, with Knowledge Bank providing insights into broker search criteria.
In 2023, the primary use for bridging loans was to prevent property chain breaks, accounting for 22% of all loans and overtaking investment purchases as the most popular reason for bridging finance.
The sector also saw growth in demand for auction purchases, regulated refinance, and re-bridges. Regulated bridging loans increased their market share to 46.3%, up from 44% in 2022, a rise attributed to heightened interest rates and the withdrawal of products by mortgage lenders, especially in the year’s first half.
The annual average bridging interest rate climbed to 0.87% in 2023 from 0.73% in 2022, reaching its highest since 2015, while the average loan-to-value ratio remained steady at 57%, indicating cautious borrowing amid the rate hikes. The data also showed a shift towards first charge loans over second charge, with the latter’s market volume dropping to a record low of 10.9%.
Completion times for bridging loans slightly decreased to 58 days from 59 days in 2022, yet this was still higher than in 2021, reflecting the sector’s growing demand. The average loan term stood at 12 months for the seventh consecutive year, underscoring the bridging finance market’s stability amid fluctuating economic conditions.
“It is encouraging to see that bridging finance’s popularity is growing and that an increasing number of borrowers are unlocking its speed and flexibility,” said Gareth Lewis (pictured), managing director at MT Finance.
“Brokers have clearly worked hard to educate their clients and that has certainly paid off. As a sense of stability returns to the mainstream mortgage market, my hope is that borrowers continue to utilise bridging’s versatility for everything from unlocking equity to funding an auction purchase and we move further away from the perception that it is solely a last resort option.”
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