Property investors drive bridging loan activity, but chain-breaks remain a significant factor behind borrowing

The latest market analysis by bridging finance specialists, Apex Bridging, has shown that the total sums lent via bridging loans dipped by -22.5% during the final quarter of 2022, although this sum remained 14.4% up on Q4 of last year, with the sector seeing a 14.3% increase between 2022 as a whole versus 2021.

Some £166.3m was lent via the bridging sector during the final quarter of last year, a drop of -22.5% versus the previous quarter. However, this sum remained 14.4% higher than the £145.4m lent during Q4 of 2021.

Bridging loans have become increasingly popular and the analysis by Apex Bridging shows that total gross lending hit £716.2m in 2022.

Despite the reduction in lending seen during the final quarter of the year, this total annual sum sits 14.3% higher than total gross lending in 2021, 57.4% higher than 2020 when the pandemic caused a notable reduction in market activity, and is the third highest total annual sum lent since 2015.

The analysis also shows that during Q3 of last year, residential homebuyers looking to overcome chain breaks were the predominant borrowers driving bridging loan performance.

However, while they remained the second most prominent consumer segment in Q4 – accounting for 15% of all lending – property investors have utilised the bridging sector to the greatest extent accounting for 26% of all borrowing.

Refurbishment accounted for 14% of all lending, while unregulated finance, popular with intermediaries, investors and developers, accounted for 10% of all lending.

Managing Director of Apex Bridging, Chris Hodgkinson, commented: “There’s no doubt that the market turbulence seen during the closing stages of last year continued to influence bridging trends, with homeowners suffering chain breaks remaining a significant consumer segment, while the average interest rate available climbed to its highest level since the second quarter of 2019 in line with the wider market.

“The average time to complete an application has also increased notably to 66 days, which reflects the more difficult landscape facing bridging lenders, although 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.”