This is a 40.6% drop compared to last quarter’s record results, when bridging loan transactions hit £278.8m. 

According to the report, consumer caution in taking on unnecessary debt amid high inflation and mortgage interest rate rises impacted the overall demand for bridging finance in Q2.

Notably, the data also reported an increase in average bridging loan completion time from 54 days in Q1 to 58 days in Q2.

The effects of consecutive base rate hikes continued to further impact the bridging market, pushing the weighted average monthly interest rate on a bridging loan from 0.79% to 0.84% — the highest interest rate since Q2 2020 (0.85%).

However, the average LTV remained comfortably under 60%, reaching 56.9% in Q2 2023, while the average loan term stayed consistent at 12 months. 

According to the Bridging Trends report, the high interest rates and product pulls in the mainstream mortgage market saw borrowers opt for bridging finance instead to complete their property purchases.

Regulated bridging extended its market share this quarter from 46.2% in Q1 to 48.7% in Q2 — the highest proportion since the 53% reported in Q3 2020 amid the stamp duty holiday.

Preventing chain breaks remained the most popular use for bridging finance for the second consecutive quarter, representing 24% of all quarterly transactions.

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Q2 also saw a rise in bridging loans for investment purchase purposes, jumping from 15% in Q1 to 22% in Q2 — Bridging Trends states this is likely due to investors and professional landlords taking advantage of a sluggish property market to purchase assets at a reduced rate.

Meanwhile, second-charge bridging loan demand dropped for the fourth quarter in a row to 10.7%, reaching its lowest level since Q3 2021.

Sam O’Neill, head of bridging at Clifton Private Finance, commented: “The rise in rate doesn’t come as a huge surprise, but it’s good to see that it isn’t as much of a dramatic reaction as perhaps it could have been.

“‘Chain break’ leading the charge in loan purposes shows that despite cost, a bridging loan is often a means to an end and that the juice is worth the squeeze.”

Dale Jannels, MD at Impact Specialist Finance, said: "Although these latest figures might seem gloomy in terms of lending volumes in Q2, it feels far from it in terms of enquiries, although it is definitely harder and more time-consuming to get some cases placed and funded with interest rates where they are currently.

“Despite this, we are seeing more motivated borrowers and fewer 'tyre kickers', which leads me to suspect a degree of pent-up demand is there and is ready to be unleashed once economic conditions become more favourable."

Matthew Dilks, bridging and commercial specialist at Clever Lending, added: "I have heard suggestions that regulated bridging will start to reduce as property sale exits are squeezed by lower sale values being achieved, but these figures — along with what we are seeing at the start of Q3 — show this isn't really happening yet and I'm not sure it will either going forward.”