Buyers flock to bridging loans to prevent chain-breaks - claim

Increasing numbers of homebuyers are taking out bridging loans to prevent a chain from collapsing.

The latest Bridging Trends industry report shows contributors reported £201.8m in bridging loans during the second quarter of 2024, a 2.9% quarterly increase and the highest for this time of year since the data was first recorded in 2015.

The majority of bridging loans taken out in Q2 (23%) were used to prevent a chain break – rising from 19% in Q1 – as borrowers faced continued conveyancing delays in the mainstream mortgage market. 

Demand for auction finance saw the biggest rise, jumping from 9% in Q1 to 14% in Q2. This is likely due to an increased number of savvy buyers taking advantage of undervalue sales as the property market remained relatively flat, the report said.The rise in bridging loans to prevent a chain break or fund an auction purchase may have contributed to the average processing time falling from 58 days in Q1 to 52 in Q2, according to the research.

Purchasing an investment asset was the second most popular use of a bridging loan but fell from 21% in Q1 to 18% in Q2 against a backdrop of uncertainty caused by sustained high interest rates combined with an early General Election.

Regardless of this, the number of unregulated bridging loans rose from 49% in Q1 to 54.2% in Q2.

Gareth Lewis, managing director at MT Finance, which compiled the report, said: “With the property market relatively stagnant in Q2, specialist lending continued to offer a flexible approach to underwriting that further increased bridging’s attractiveness. 

“This can be seen in the fact that this quarter’s contributor gross lending was a record high and is testament to the sector’s versatility. I am encouraged to see the uptick in unregulated lending and am hopeful that this marks a turning point for landlords and investors who have been hit so hard in recent years. That completion time dropped by six days from 58 to 52 indicates how hard everyone is working to get these deals over the line.”