"We could be set for a steadier end of the year too, as homeowners are adapting to a new normal of higher mortgage rates."
After having a big impact on the housing market at the start of the year, bridging lending slowed to a steady pace in the second quarter of 2023, according to new analysis from Apex Bridging.
In the second quarter there was £165.7 million of bridging lending, which represents a 40.6% drop from £278.8 million in the first quarter.
However, the Q1 total was the highest measured since the pandemic and levels of bridging lending in Q2 2023 have roughly reverted to what was recorded in Q4 2022, when lending stood at £166.3 million.
On an annual basis lending dropped by 7.1%, falling from £178.4 million in Q2 2022.
Bridging can thrive in difficult economic times when transactions are falling through. A chain break continued to be the most popular use of bridging in Q2 at 24% of all loans.
The second most popular use was for investment purchases, at 22%, followed by heavy refurbishments, at 13%.
Apex says it’s likely bridging slowed down in Q2 due to buyers and sellers adjusting to higher mortgage rates throughout 2023, following a more turbulent Q1.
The proportion of borrowers using the product for investment purchases increased from 15% in Q1 to 22% in Q2, suggesting more people have confidence in the market to use the finance to make a healthy return, rather than just for a chain break situation.
Similarly the proportion using bridging for heavy refurbishments rose from 10% in Q1 to 13% in Q2.
While rates haven’t increased by the levels in the mainstream mortgage market, bridging finance has become more expensive, which could serve to dampen down activity.
Typical bridging rates stood at 0.84% in the second quarter of 2023, up from 0.79% in the first quarter, and 0.69% in the second quarter of 2022.
Managing director of Apex Bridging, Chris Hodgkinson, commented: “The bridging sector was a calmer place over the spring and summer months, taking a breath after having an extraordinarily busy Q1.
“We could be set for a steadier end of the year too, as homeowners are adapting to a new normal of higher mortgage rates.
"Finance is also becoming more expensive in the short-term lending sector, making it harder for investments to pay off.
“One positive is a greater proportion of people using the product for investment purchases and heavy refurbishments, suggesting investors are still seeing opportunities to make strong returns in the current market despite the tougher conditions."