Investment property purchases have become the primary use of bridging finance in the UK, according to new quarterly data tracking specialist lending activity.
Investment purchases accounted for 23% of bridging transactions between July and September, up from 18% in the previous quarter, according to Bridging Trends, the quarterly index compiled by MT Finance from completions by specialist finance packagers.
Contributors lent £181.8 million during the third quarter, representing a 5% increase from £173.1 million in the second quarter. However, total lending remained 13.2% below the £209.4 million recorded in the same period last year.
Market trends and lending conditions
Unregulated lending rose to 55% of total bridging finance, up from 52% in the second quarter. The average monthly interest rate fell to 0.77%, down from 0.81%, marking the fourth consecutive quarterly decline.
Average completion times dropped by five days to 41 days, while the average loan term remained unchanged at 12 months. The average loan-to-value ratio increased from 55% to 59%, suggesting borrowers were able to access higher leverage while maintaining manageable costs.
First-charge bridges rose from 78% of lending to 87%, with second charges falling from 22% to 13%. Heavy refurbishment bridges declined from 10% to 6% as building costs remained elevated, reflecting broader challenges facing landlords navigating current market conditions.
Industry perspectives
Fergus Allen, head of bridging at Clifton Private Finance, said: “The bridging market appears to be moving towards more investment-led, first-charge lending, with borrowers benefiting from increasingly competitive rates and higher leverage.”
Allen noted that lenders appeared to be completing transactions more quickly, though he attributed this trend primarily to increased competition between lenders rather than sustainable market growth.
Raphael Benggio, bridging director of MT Finance, said: “It is really encouraging to see the drop in both completion times and interest rates. This shows that despite the geopolitical landscape, lenders are continuing to support borrowers which helps to drive much-needed momentum.”
Market outlook
The shift towards investment property purchases comes as mortgage brokers report various challenges in the property transaction process, with bridging finance offering speed advantages over traditional mortgage products. The data suggests bridging finance is increasingly being used as a strategic tool for property investors seeking to move quickly in competitive markets, though year-on-year lending volumes indicate some caution remains in the sector.
