Bridging lenders transacted a record high £278.8m in bridging loans during the first quarter this year, according to the latest Bridging Trends data.

This represents a 30% increase on the previous record, which was £214.7m registered in Q3 2022, as well as a 68% climb on Q4 2022, which saw £166.3m worth of bridging transactions.

Demand from residential homeowners was the main driver of bridging loan transactions in Q1 2023, amid continued uncertainty surrounding rising interest rates and risk appetite in the mortgage market. The percentage of homeowners turning to bridging finance to prevent chain breaks increased from 15% in Q4 2022 to 25% in Q1 this year.

Meanwhile, demand from investors and landlords using bridging loans to purchase investment assets dropped to a new record low of 15% – a figure down from 26% in Q4 2022. The trend could suggest that in the wake of recent rate increases, landlords and property investors are waiting until interest rates become more consistent before they purchase new investment properties.

Regulated bridging demand climbed marginally from 43.8% in Q4 to 46.2% in Q1, its highest share since Q1 2021 (47.7%), which Bridging Trends suggested was likely due to homeowners wanting to avoid post-mini-Budget disruption and take advantage of rates and flexibility in the bridging market.

Bridging and commercial specialist at Clever Lending, Matthew Dilks, commented: “It’s no surprise to see such continued growth in the use of regulated bridging for chain break purposes. We are seeing many brokers new to bridging who are using the product and our services for support, experience, and, for some, to do the advice also.

“We've also experienced a notable increase in enquiries for regulated bridging from brokers with clients wishing to downsize, so it's important that brokers consider the wider range of client circumstances such a product can help with.”

Bridging Trends, launched in 2015, is a quarterly publication developed by specialist finance lender, MT Finance, as a method for monitoring the latest trends in the bridging finance sector.

The latest data showed that Q1 saw average monthly interest rates remain steady at 0.79%, reflecting the instability felt by lenders and the mortgage market. Despite this, the average loan-to-value (LTV) dropped from 57.9% in Q4 to 54.7% in Q1, which Bridging Trends said could be attributed to lenders taking a cautious approach to issuing high LTV products in the current climate.

Furthermore, the average completion time of a bridging loan fell to 54 days in Q1 2023, down from 66 days reported in Q4 2022 – and the quickest since 53 days in Q1 2022 – as the industry handles increased demand.

“Once again, these latest figures demonstrate that bridging finance is moving towards a product now better understood and offered by an increasing number of brokers, not just those who solely work in the specialist finance sector,” commented managing director at Impact Specialist Finance, Dale Jannels.

“However, experience in finding solutions and placing such cases is vital and we have witnessed a wider range of brokers contacting us than ever before, many of whom are coming via our many positions on mortgage club and network panels, and especially relating to the increase in regulated bridging demand.”

Capital B Property Finance director, Andre Bartlett, added: “We’ve certainly seen an increase in regulated bridging requests from clients looking to downsize or chain break, so they can choose when to sell their property and not panic whilst the market reacted to the changes in the economy.

“More and more clients are realising bridging loans can unlock equity and put them as the best purchaser on a new property if used correctly. With the slight slowdown in the property market, it is good to see that processes are getting quicker and returning to the way bridging loans should be.”

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