The stamp duty holiday helped drive a significant increase in bridging finance activity during 2021, with £626.7m of bridging loans approved by Bridging Trends contributors, up 38% on the £455m recorded in 2020.
The £171.69m annual increase was particularly evident during the third quarter, when £190.24m of bridging finance was completed as buyers looked to take advantage of the stamp duty holiday before it came to an end.
Bridging Trends is a quarterly publication tracking bridging loan completions across the UK specialist finance market. Its contributors include Adapt Finance, Brightstar Financial, Capital B, Clever Lending, Complete FS, Enness Global, Finanta, Impact Specialist Finance, LDNfinance, Optimum Commercial, Sirius Group and UK Property Finance.
Regulated bridging loans accounted for an average of 40.8% of all contributor transactions during 2021. Demand was strongest during the first half of the year, reaching 47.7% in Q1 and 41.6% in Q2 as homeowners sought to complete purchases ahead of the stamp duty deadline. This fell to 37.7% in Q3 and 36% in Q4.
Second charge bridging loans accounted for 15% of total contributor transactions in 2021, down from 23% in 2020 and the lowest annual proportion recorded since Bridging Trends launched in 2015.
Borrowing costs also continued to fall, with the average monthly interest rate decreasing to 0.76% from 0.79% in 2020. At the same time, the average loan-to-value reached a record high of 56.9%, compared with 50.7% in 2020.
Funding an investment purchase was the most common reason for using bridging finance, accounting for 25% of all contributor completions, up from 22% in 2020. Funding a chain break ranked second at 18%, compared with 17% the previous year, highlighting the continued role of bridging finance in helping buyers progress delayed property transactions.
The average bridging loan term remained at 12 months, while the average completion time increased slightly to 52 days, compared with 50 days in 2020.
Enness Global Head of Specialist Lending, Chris Whitney, highlighted the continued decline in second charge bridging activity and the potential need for further innovation across this area of the specialist lending market.
Data from Knowledge Bank also showed that maximum LTV remained one of the most frequently searched bridging criteria, reflecting the focus on maximising available borrowing. Regulated bridging continued to feature prominently, while searches for minimum loan amounts suggested a growing number of borrowers were using bridging finance to fund smaller-scale property improvements.
Overall, the 2021 figures demonstrated the impact of the stamp duty holiday on bridging demand, while also underlining the sector's increasing role in supporting investment purchases, chain breaks and more complex property transactions.
