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Increase in UK Bridging Loans Signals Robust Market Growth

The UK’s property market is seeing a rise in the demand for bridging loans, especially in the first quarter of 2024, with transactions totalling an impressive £196.2 million. This marks a modest but significant growth of 0.4% compared to the closing months of 2023. Such figures highlight the resilience and evolving nature of the bridging finance sector, a critical tool for those needing short-term financial solutions.

A Closer Look at the Numbers

Increased Business Funding

One of the standout trends this quarter is the surge in bridging loans for business funding, which nearly doubled from 8% in the last quarter of 2023 to 15% in the initial months of 2024. This is the highest level seen since the end of 2021, underscoring a growing recognition of bridging finance as a viable option for business-related funding needs.

Investment and Property Market Dynamics

Despite a slight decrease, purchasing investment assets remains the most common reason for securing a bridging loan, accounting for 21% of all loans. However, a significant development is the increased use of bridging finance to avoid property chain breaks, which rose to 19% from 16%. With ongoing conveyancing delays, more homeowners find themselves relying on bridging loans to ensure they can move forward with purchasing new homes without delays.

Regulatory Changes and Interest Rates

Growth in Regulated Bridging

The market for regulated bridging loans has seen substantial growth, reaching a peak of 51% of all loans in the first quarter, the highest since the third quarter of 2020. This increase is likely a contributing factor to the drop in the average monthly interest rate, which fell slightly from 0.91% to 0.89%. The shift towards more regulated bridging loans suggests a maturing market that adheres closely to financial regulations, providing more security for borrowers.

Leveraging Equity

Another key aspect is the rising demand for second charge bridging, which hit a three-year high of 21.3%. This reflects a strategic approach by borrowers to leverage the equity in their existing assets. Second charge loans allow homeowners to secure additional financing against their property, underlining the versatility of bridging finance as a solution for diverse financial needs.

Market Stability and Outlook

Loan-to-Value and Completion Times

The average loan-to-value (LTV) ratio stood at 60%, a slight increase from 59.3%, showing a stable borrowing environment. Moreover, the completion time for bridging loans has consistently averaged 58 days, indicating a steady market with predictable transaction timelines.

Expert Insights

William Lloyd-Hayward, Chief Operating Officer of Sirius Finance group, emphasised the diversification and resilience of the bridging sector. According to him, the broadening demand across various applications, from business funding to homeowner purchases, signals a robust future for this financial sector.

Gareth Lewis, Managing Director at MT Finance, also noted the integral role of bridging loans in maximising property equity without disrupting existing mortgages. He predicts that the interplay between second charge and regulated bridging loans will further enhance the ability of homeowners to secure their ideal properties.


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