Some £716.2m of bridging loans were transacted by Bridging Trends contributors in 2022 — the highest annual figure reported since 2019 (£732.7m).

This marks a 14% increase on the £626.7m transacted in 2021.

Despite market challenges, all four quarters reported year-on-year growth in contributor lending (Q1: £156.8m; Q2: £178.4m and Q4 £166.3m), with transactions peaking in the third quarter at £214.7m — the highest level of loans transacted by contributors in a single quarter since Bridging Trends launched in 2015.

Funding an investment purchase remained the most popular use for bridging finance last year, although demand decreased from 25% in 2021 to 23% in 2022.

Meanwhile, loans for unregulated refinances saw the greatest increase in demand, surging to 11% of total transactions in 2022 from 6% the previous year.

A continued shortage of housing stock resulted in an increasing number of homeowners turning to bridging finance, with regulated transactions accounting for 44% of all bridging loans in 2022, compared to 40.8% in 2021.

The need for rapid transactions was further highlighted by the rise in bridging loans being used to prevent chain breaks, which rose from 18% in 2021 to 20% last year.  

Second-charge bridging loan levels dropped to 13.7% from 14.8% in 2021 — a record low for annual Bridging Trends data.

According to the report, this could be due to borrowers looking to move and purchase new properties, rather than releasing equity in their current assets.

The average annual interest rate fell to 0.73% last year, down from 0.76% in 2021 and 0.79% in 2020.

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Average LTV remained static at 57% and average loan terms held steady at 12 months, while the average completion time for a bridging deal crept up from 52 to 59 days.

Dale Jannels, managing director at Impact Specialist Finance, said: “With the lack of housing stock unlikely to change in 2023, along with continued affordability challenges for borrowers due to increased interest rates, the use of regulated bridging to fund onward purchases before their current home is sold will remain a viable option, and I do not expect to see a reduction in its use anytime soon.

“It is also interesting to see an increase in unregulated refinance and I expect to see this trend continue with landlords making HMO conversions, plus a realisation from more and more landlords that the EPC regulations aren’t going away.

“This will lead to more improvements being made to boost energy efficiency, especially in older properties.”

Chris Whitney, head of specialist lending at Enness, added: “The 2021 versus 2022 comparison doesn’t really give us any surprising data — both years had their challenges for different reasons in terms of the macro economy.

“However, the numbers seem to indicate that borrowers were very much in a ‘keep calm and carry on’ mentality.

“I think we saw lenders take the same view and adapt to things like cost of funds increases swiftly.

“Still modest LTVs overall, indicating responsible borrowing and lending.

“The healthy increase in borrowing was nice to see and confirms what we already know — that the bridging finance market has matured, is here to stay, and a tool increasingly used by borrowers as a matter of course rather than just by exception.

“2023 will, I am sure, also have its challenges, but the mood in the market as we kick the year off seems hugely positive.”