Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Strategy. Read the original article for full details.

Bridging Lending Falls 15% in Q2 2024, Says MT Finance Report

Bridging lending by major providers dropped by 15% to £173.1 million in the second quarter of 2024, compared to £199.2 million in the first quarter, according to the latest Bridging Trends report from MT Finance. The report also shows a year-on-year decline, with gross lending at £199.7 million in Q2 2023.

The data, compiled from some of the largest lenders and brokers in the sector, highlights several trends relevant to UK letting agents and inventory clerks. The report notes that the most popular uses for bridging loans in Q2 were preventing a chain break and purchasing investment property, each accounting for 18% of transactions. In Q1, these figures were 14% and 22% respectively.

The proportion of regulated bridging loans increased from 41% in Q1 to 48% in Q2, marking the largest quarterly rise since Q1 2022. Demand for auction finance also grew, rising from 11% in Q1 to 14% in Q2.

The report indicates that homeowners, investors, and business owners have increasingly used bridging loans to unlock equity without changing their existing mortgages. Heavy refurbishment bridging loans rose from 6% in Q1 to 10% in Q2, while loans used for business injections more than doubled from 4% to 9% over the same period.

Second charge bridging loans saw a significant increase, rising from 9% in Q1 to 22% in Q2, the highest level since Q1 2021. Despite this, the average monthly interest rate remained relatively stable, decreasing slightly from 0.82% in Q1 to 0.81% in Q2. The average loan-to-value ratio increased from 52% to 55%, and the average completion time dropped from 53 days in Q1 to 46 days in Q2.

Broker criteria searches reflected a shift towards larger and more complex cases, with increased interest in cross collateral charges, maximum property value, and development finance for commercial property.

These trends may impact letting agents and inventory clerks, particularly in areas such as chain breaks, investment property transactions, and refurbishment projects.