Bridging loans grew in popularity last year, despite the rising interest rate environment, with the total sum lent to borrowers up 14.3 per cent year-on-year.
Total lending for 2022 stood at £716.2mn, according to MT Finance's quarterly Bridging Trends figures.
While the sector grew as a whole in 2022, lending saw a significant dip of 22.5 per cent in the final quarter of the year. However, this remained 14.4 per cent up on the same period in 2021.
Managing director of bridging finance specialists Apex Bridging, Chris Hodgkinson, said this quarterly drop was as a result of the wider economic market conditions.
“There’s no doubt that the market turbulence seen during the closing stages of last year continued to influence bridging trends, while the average interest rate available climbed to its highest level since the second quarter of 2019 in line with the wider market,” Hodgkinson explained.
Table shows the annual level of gross lending across the bridging sector and the year on year change | |||
Year | Total gross lending (£mn) | Change n | Change % |
2015 | £432.50 | - | - |
2016 | £482.60 | £50.10 | 11.60% |
2017 | £534.10 | £51.50 | 10.70% |
2018 | £766.90 | £232.80 | 43.60% |
2019 | £732.70 | -£34.20 | -4.50% |
2020 | £455.00 | -£277.70 | -37.90% |
2021 | £626.70 | £171.70 | 37.70% |
2022 | £716.20 | £89.60 | 14.30% |
Source: Bridging Trends, MT Finance
Bridging loans have become increasingly popular, with lending in the sector up 66 per cent since 2015.
Chain-breaks drove an increase in residential bridging in Q3 2022, with homebuyers looking to overcome breaks in their chain the predominant borrowers driving bridging loan performance.
This segment remained the second most prominent consumer segment in the final quarter of the year, accounting for 15 per cent of all lending.
In Q4, property investors were the greatest users of bridging finance, accounting for 26 per cent of all borrowing.
Refurbishment accounted for 14 per cent of all lending, while unregulated finance, popular with intermediaries, investors and developers, accounted for 10 per cent.
Hodgkinson noted that the average time to complete an application increased notably to 66 days.
He said this reflects the more difficult landscape facing bridging lenders but added that “it remains a very fast route to securing finance for those who require fast cash.”
“What’s also clear is that while the market may have cooled, confidence amongst investors and developers remains strong. Investment purchases accounted for the highest proportion of lending, with refurbishment also a driving factor for borrowers, which suggest that those utilising bridging loans within a professional capacity are getting their house in order for the year ahead,” Hodgkinson said.
jane.matthews@ft.com