2022 got off to a strong start, with Bridging Trends contributors reporting a total of £156.78m in bridging loan transactions during the first quarter of the year. This was 8.5% higher than Q1 2021, when transactions totalled £144.51m, and 7.8% higher than the previous quarter, which recorded £145.42m.
The figures indicated that more borrowers turned to bridging finance to unlock property transactions, meet deadlines and benefit from the flexibility associated with short-term finance.
For the fourth consecutive quarter, the most popular use of a bridging loan was the purchase of an investment property, accounting for 26% of all loans in Q1 2022. This was down from 29% in the previous quarter.
The competitive nature of the property market was also reflected in the second most popular reason for using bridging finance. Funding a chain break accounted for 23% of all lending in Q1, up from 18% in Q4 2021.
Borrowing also became more affordable during the quarter, with the average monthly interest rate on a bridging loan falling to a historic low of 0.71%, compared with 0.77% in Q4 2021.
The reduction in pricing was largely driven by an increase in regulated lending. Demand for regulated bridging loans increased for the first time since Q1 2021, with regulated loans accounting for 43.9% of transactions in Q1 2022, compared with 36% in the previous quarter.
The increase in regulated bridging activity also coincided with lower average loan-to-values. The average LTV fell to 54.5% in Q1, down from 57.3% in Q4 2021, potentially reflecting higher property asking prices.
Bridging Trends combines bridging loan completion data from a number of specialist finance packagers operating within the UK bridging market, including Adapt Finance, Brightstar Financial, Capital B, Clever Lending, Clifton Private Finance, Complete FS, Enness Global, Impact Specialist Finance, LDNfinance, Optimum Commercial, Sirius Group and UK Property Finance.
Demand for regulated bridging products was also reflected in data from Knowledge Bank, which identified regulated bridging as the most searched bridging finance criteria among brokers using its platform during Q1 2022.
Bridging loans for business purposes saw the largest decrease in demand, with transactions falling from 15% to 10%. This may have reflected increased caution among business owners considering new ventures or investment during a period of economic uncertainty.
As purchase transactions increased, the proportion of second charge bridging transactions declined. These accounted for 11.9% of all loans during Q1 2022, compared with 17% in the previous quarter and 22.2% during the same period a year earlier.
The average bridging loan term remained at 12 months during the first quarter, while the average completion time improved to 53 days, down from 56 days in Q4 2021.
Overall, the first quarter of 2022 demonstrated continued growth across the bridging sector, with increased transaction volumes, lower borrowing costs and stronger demand for regulated products. The data also highlighted the growing role of bridging finance in supporting property purchases, investment activity and chain-break transactions in a competitive housing market.
