Throughout the first quarter of the year preventing a chain break was the second most popular purpose for obtaining bridging finance, increasing to 19% from 16% in the previous quarter
Around one in five bridging loans issued by the UK’s top finance distributers is being used to prevent property transactions breaking down, according to the latest figures from Bridging Trends.
Throughout the first quarter of the year preventing a chain break was the second most popular purpose for obtaining bridging finance, increasing to 19% from 16% in the previous quarter.
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 requirement 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 risen from 44.2% in Q4 2023 to 51% in Q1 2024 – the highest it has been since Q3 2020’s 53%.
Borrowers utilised bridging finance mostly to buy investment assets in Q1, accounting for 21% of loans, down from 24% in Q4 2023.
Nonetheless, the demand for business funding saw the most significant rise, nearly doubling from 8% in Q4 2023 to 15% in Q1 2024 – the highest it has been since Q4 2021.
William Lloyd-Hayward, Group COO at Brightstar Financial and MD at Sirius Finance, notes: 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 climbing to pre-pandemic levels.
He added: The overall picture demonstrates that more brokers and borrowers are recognising bridging as a flexible solution to meet a wide variety of capital challenges.