Q2 bridging data points to a more defensive and flexible finance market

Lower lending does not tell the whole story

Gross contributor lending fell by 15% quarter on quarter, from £199.2 million in Q1 to £173.1 million in Q2, according to Bridging Loan Directory’s report on the latest Bridging Trends data. The publication links this decline to uncertainty associated with the conflict in Iran, which may have led some borrowers to postpone transactions around the end of Q1 and beginning of Q2.

It is important to recognise that the figure represents completions submitted by the specialist finance packagers contributing to Bridging Trends, rather than total UK bridging market volumes. Even so, the change provides a useful indication of borrower sentiment. The fall in contributor lending suggests that geopolitical uncertainty affected timing and confidence, but the underlying transaction data indicates that demand did not simply disappear. Instead, borrowers adjusted how and why they used short-term finance.

Regulated bridging moves to the foreground

The proportion of regulated bridging increased from 41% in Q1 to 48% in Q2, the largest quarterly rise since Q1 2022. Bridging Loan Directory reports that preventing a chain break accounted for 18% of transactions, up from 14%, making it joint with investment property purchases as the most common use.

For lenders and brokers, this shift places greater emphasis on regulated transaction requirements, clear documentation and realistic repayment strategies. For borrowers facing completion deadlines, execution risk becomes as important as headline cost. The average completion time fell from 53 days to 46 days, suggesting greater efficiency among the parties involved, while the average term remained at 12 months.

Developers and investors should note the wider implication. Where mainstream products are withdrawn or repriced, finance planning may need to begin earlier and include alternative structures. Bridging can provide flexibility, but its suitability depends on the asset, transaction timetable and credible route to repayment.

Second charges reflect a preference to preserve existing debt

Second charge bridging rose sharply from 9% of Q1 activity to 22% in Q2, its highest proportion since the 22.2% recorded in Q1 2021. Bridging Loan Directory attributes this pattern to homeowners, investors and business owners seeking equity without disturbing their current mortgages.

This is particularly relevant where an existing first charge remains commercially valuable to the borrower. A second charge may allow capital to be raised for another purpose while leaving that facility in place, subject to lender consent, security position and affordability considerations. The data also shows heavy refurbishment increasing from 6% to 10% of transactions, while business injections rose from 4% to 9%.

For property investors, these movements suggest a stronger focus on using existing portfolios to support refurbishment, acquisitions or business requirements. For funders, they also increase the importance of understanding aggregate leverage, intercreditor positions and the proposed use of funds.

Leverage and pricing remained comparatively stable

Despite the larger share of second charge lending, the average monthly interest rate decreased marginally from 0.82% to 0.81%. Average loan-to-value rose from 52% to 55%, remaining below 60%, according to the report. This combination suggests that the change in loan structure did not coincide with a substantial rise in average pricing or leverage across the contributor data.

However, averages should not be treated as a guide to any individual transaction. Property type, security ranking, borrower circumstances, works, exit strategy and execution timetable can all affect lender appetite and terms.

Opportunity-led demand remains visible

Auction finance increased from 11% of transactions in Q1 to 14% in Q2. Investment property purchases remained one of the two leading uses of bridging, although their share declined from 22% to 18%. Knowledge Bank also recorded notable changes in broker searches for cross collateral charges, lease extension before completion and holiday lets.

Collectively, these indicators point to a market balancing caution with opportunity. Lower contributor volumes show that uncertainty has consequences, but faster completions and increased use of second charges, auction finance and refurbishment funding demonstrate continued demand for adaptable capital. For developers and investors, the central lesson is that finance structure, security and exit planning should be considered alongside acquisition strategy from the outset.