Bridging lending slows in Q2

Bridging lending slowed to a steady pace in the second quarter of 2023 after having a big impact on the housing market at the start of the year, research from Apex Bridging has found.

In the second quarter there was £165.7 million of bridging lending, which represents a -40.6% drop from £278.8 million in the first quarter.

However, the Q1 total was the highest measured since the pandemic, so it shouldn’t be seen as normal for these levels to be maintained.

Chris Hodgkinson, managing director of Apex Bridging, said: “The bridging sector was a calmer place over the spring and summer months, taking a breath after having an extraordinarily busy Q1.

“We could be set for a steadier end of the year too, as homeowners are adapting to a new normal of higher mortgage rates.

“Finance is also becoming more expensive in the short-term lending sector, making it harder for investments to pay off.

“One positive is a greater proportion of people using the product for investment purchases and heavy refurbishments, suggesting investors are still seeing opportunities to make strong returns in the current market despite the tougher conditions.”

It’s likely bridging slowed down in Q2 due to buyers and sellers adjusting to higher mortgage rates throughout 2023, following a more turbulent Q1.

In the winter months buyers were struggling to deal with big fluctuations to mortgage rates, so property transactions were more likely to break down, requiring bridging to step in.

The proportion of borrowers using the product for investment purchases increased from 15% in Q1 to 22% in Q2, which suggests more people have confidence in the market to use the finance to make a healthy return, rather than just for a chain break situation.

Similarly the proportion using bridging for heavy refurbishments rose from 10% in Q1 to 13% in Q2.

While rates haven’t increased by the levels in the mainstream mortgage market, bridging finance has become more expensive, which could serve to dampen down activity.

Typical bridging rates stood at 0.84% in the second quarter of 2023, up from 0.79% in the first quarter, and 0.69% in the second quarter of 2022.