Bridging loans reached record highs in the second quarter of 2024.

• £201.8 million was lent out in bridging loans in Q2, an increase from the previous quarter’s £196.2 million.
• This represents a 2.9% increase from Q1, demonstrating the growing reliance on short-term financing.

Why is Bridging Lending on the Rise?

The increase in bridging loans is directly linked to the rising number of property chains collapsing.

• Chain breaks: Buyers are struggling to secure mortgages due to lengthy processing times, and they need quick access to funds to complete their purchases. This is pushing more people towards bridging loans, a faster solution to secure the funds they need.
• Auction finance: The popularity of auction finance is soaring. Developers are using bridging loans to purchase undervalued properties at auction, where quick decision-making and access to funds are crucial.

Changes in the Bridging Landscape:

• Processing times: The increased demand for bridging loans has led to faster processing times. The average time to secure a bridging loan fell from 58 days in Q1 to 52 days in Q2.
• Unregulated loans: While the interest rate environment remains challenging, the bridging market is adapting. The number of unregulated bridging loans increased from 49% in Q1 to 54.2% in Q2. This flexibility is attracting investors and landlords who are seeking alternative financing solutions.

The Bottom Line:

The bridging lending market is experiencing a boom, driven by the need to prevent chain breaks and capitalise on auction opportunities. This presents both opportunities and challenges for developers and investors, who must adapt to the evolving market conditions.