Bridging Loan Activity Remains Robust Amidst Growing Demand for Business Financing

Recent findings from Bridging Trends indicate that contributor gross bridging lending hit £196.2 million in the first quarter of 2024, underscoring the increasing appetite for additional business funding among entrepreneurs.

Quarter 1 2024 key points:

• Gross Contributor Lending: A 0.4% increase
• Business Financing Demand: Doubled from previous periods
• Second Charge Bridging Loans: Achieved a three-year peak
• Regulated Bridging Deals: Rose to pandemic-era levels

The reported bridging loan transactions for quarter 1 2024 held steady at £196.2 million, a continuation of the momentum seen in quarter 4 2023’s £195.5 million.

Trends in bridging finance utilisation: Quarter 1 2024 Overview

During quarter 1 2024, the primary use of bridging finance was for acquiring investment properties, representing 21% of the total loans, slightly down from 24% in quarter 4 2023. Notably, business funding demand saw a significant rise, almost doubling from 8% in quarter 4 2023 to 15% in quarter 1 2024, its highest point since quarter 4 2021. This surge is likely a result of business owners pursuing stability and growth opportunities.

Preventing chain breaks was the second most common reason for securing bridging finance in quarter 1, with its share increasing to 19% from 16% in the prior quarter.

Increasing bridging loan demand due to home purchase delays

With prolonged home purchase processes and the risk of chain breaks, more homeowners are opting for bridging loans to secure their desired properties. This led to regulated bridging loans comprising 51% of all bridging loans in quarter 1 2024, up from 44.2% in Quarter 4 2023, the highest since Quarter 3 2020’s 53%.

Data from Knowledge Bank shows that regulated bridging was the top search criterion for UK bridging loan brokers in quarter 1. This increased preference for regulated bridging likely contributed to the decrease in the average monthly interest rate from 0.91% in quarter 4 2023 to 0.89% in quarter 1 2024.

There was also a notable rise in borrowers using bridging finance to leverage equity in their assets. The demand for second charge bridging climbed to a three-year high of 21.3% in quarter 1, up from 11.6% in quarter 4 2023 and nearing quarter 1 2021’s 22.2%.

The average loan-to-value (LTV) ratio edged up to 60% in quarter 1, from 59.3% in quarter 4 2023. The average time to complete a bridging loan remained at 58 days, and the average loan term has been steady at 12 months for ten consecutive quarters.

For more details, check out the Bridging Trends from quarter 1 in 2024 infographic at www.bridgingtrends.com.