20% of bridging loans being used to stop chains breaking down
As conveyancing delays lead to longer transactions and more broken chains, buyers are turning to bridging to secure the home they want to buy, it is claimed.
Nearly one in five bridging loans issued by the UK’s top finance distributers is being used to prevent property transactions breaking down, latest figures from Bridging Trends reveals.
Throughout the first quarter of the year preventing a chain break was the second most popular purpose for obtaining bridging finance, rising to 19% from 16% in the previous quarter.
BROKEN CHAINS
With conveyancing delays leading to protracted home purchase transactions and the potential for a greater number of broken chains, more homeowners are turning to bridging to secure the home they want to buy.
Unlike a mortgage, bridging finance is a short-term loan used to “bridge” the gap between the need for immediate funding and the availability of longer-term financing.
Typically, bridging loans are designed to be repaid within a few months to a couple of years, depending on the specific terms and conditions set by the lender.
Bridging Trends also reveals the number of regulated bridging loans has increased from 44.2% in Q4 2023 to 51% in Q1 2024 – the highest it’s been since Q3 2020’s 53%.
Borrowers utilised bridging finance mostly to purchase investment assets in Q1, accounting for 21% of loans, down from 24% in Q4 2023.
However, the demand for business funding saw the most significant increase, nearly doubling from 8% in Q4 2023 to 15% in Q1 2024 – the highest it has been since Q4 2021.
DEMAND DOUBLED
William Lloyd-Hayward, Group Chief Operating Officer at Brightstar Financial and Managing Director at Sirius Finance, says: “Overall lending continues to grow, and the diversity of this growth is striking. Demand from businesses for short-term property funding, for example, has doubled, while homeowners are increasingly turning to bridging, with the regulated part of the market jumping to pre-pandemic levels.
“The overall picture demonstrates that more brokers and borrowers are recognising bridging as a flexible solution to meet a wide variety of capital challenges.”
Gareth Lewis, Managing Director at MT Finance, adds: “It’s clear that borrowers are continuing to turn to bridging lenders thanks to the certainty, speed, and flexibility we are offering them.”
