Housing Market Volatility Drives Strong Performance For UK Bridging

Volatility on the UK housing market is driving record bridging loan transaction volumes, as mainstream borrowers and commercial customers seek alternatives to traditional High Street mortgages.

New data from Revolution Brokers indicates a 20.3% quarterly increase in bridging loans issued in the UK, totalling £217.4 million for Q3. This also represents an increase of almost 13% compared to the same time last year, and a huge 47% increase since the Bank of England began rolling out base rate increases in the fourth quarter of 2021.

Elsewhere, the latest Bridging Trend report suggests that escaping conventional property chains is now the most popular use for bridging finance in the UK. A reflection of the volatility of the housing market, more homeowners than ever before are turning to bridging finance to purchase properties for cash and beat competing bidders to the punch.

The figures published by Revolution Brokers indicate that the average LTV on a bridging loan for October was 59.6% – a quarterly increase of 3.5%, but a decline of 0.6% compared to the same time last year.

Property Chain Breaks

A full 22% of all bridging loans issued in the third quarter were used for property chain breaks – a 4% increase compared to the closing quarter of 2021.  Meanwhile, purchasing investment properties fell to second place, accounting for just 16% of all loans issued – a drop of 13 per cent compared to the fourth quarter of last year.

This suggests that in the face of lingering economic uncertainty, investors are putting their planned property purchases on hold for the time being.

“At a time when investment purchases are dropping but total bridging loan lending is on the rise, it’s reasonable to conclude that the housing market has become increasingly volatile in recent months,” commented Almas Uddin, Founding Director of Revolution Brokers.

“The rise in broken chains, for example, could partially be because many buyers are taking a look at living costs and rising mortgage rates and having second thoughts about imminent purchases, pulling out at the eleventh hour.”

A Fall to Follow?

While the bridging sector is expected to remain buoyant indefinitely, there are those who see an inevitable fall in bridging loan volumes on the horizon.

Speaking on behalf of Henry Dannell, Director Geoff Garrett suggested that while the immediate outlook for the bridging sector is bright, the coming months could bring a gradual slowdown in overall activity.

“An increase in bridging loans does not signify that people are struggling financially. Such loans are taken in order to fund major purchases or investments but can only be granted to people who can prove they have larger, longer-term loans coming their way, such as a mortgage,” he said.

“Instead, an increase in bridging loan totals indicates that the systems in place are struggling to keep up with demand and can’t match the desired pace of buyers and sellers. The housing market, for example, is moving more slowly than it did a year ago, even two and three years ago. At the same time, buyer demand is extraordinarily high, and activity is through the roof. This causes delays in the conveyancing and buying process which, in turn, increases the need for bridging loans.”

“However, with the cost of living and interest rates rising so rapidly, one has to expect to see a slight drop off in buyer demand and, therefore, a decline in bridge financing over the next year or so.”

Craig Upton

Craig Upton supports UK businesses by increasing sales growth using various marketing solutions online. Creating strategic partnerships and keen focus to detail, Craig equips websites with the right tools to rank in organic search. Craig is also the CEO of iCONQUER, a UK based SEO Firm and has been working in the digital marketing arena for many years. A trusted SEO consultant and trainer, Craig has worked with British brands such as FT.com, djkit.com, Bridging Finance, Serimax and has also supported UK doctors, solicitors and property developers to gain more exposure online. Craig has gained a wealth of knowledge using Google and is committed to creating new opportunities and partnerships.