Sector records increase in applications and shift in loan purposes as interest rates fall
The bridging finance sector demonstrated continued resilience and market stability in the second quarter of 2025, with key indicators pointing to a maturing and increasingly competitive marketplace, according to the latest industry data.
The average monthly interest rate for bridging loans fell by 0.05 percentage points, from 0.86% in the first quarter to 0.81% in the second quarter. This decline has been attributed to reductions in base and swap rates, as well as a lower weighted average loan-to-value (LTV). The trend continues a pattern of increased competition and lower borrowing costs seen over the past year.
Application volumes rose 11% year-on-year, reaching 460 in Q2 2025 compared to 415 in the same period last year. Quarter-on-quarter growth was 2%, suggesting ongoing demand for bridging finance.
Total gross lending remained largely unchanged at £199.7 million, a 1% decrease from both the previous quarter (£202 million) and Q2 2024 (£201.8 million). The figures indicate stable lending activity despite wider market fluctuations.
First charge loans accounted for 10% of the market, while second charge loans made up the remaining 90%. The average LTV held steady at 54%, and the typical loan term was around 12 months.
Refinance activity increased significantly in the second quarter. Regulated refinance cases rose by 76%, from 46 in Q1 to 81 in Q2, while unregulated refinance grew by 63%, from 30 to 49. Regulated refinance now represents 18% of all loans by purpose, up from 10% in the previous quarter.
Loans for auction purchases also edged up, making up 13% of the total in Q2, compared to 12% in Q1. This points to ongoing use of bridging finance in property auctions.
Knowledge Bank data showed that development bridging and development finance were the most searched criteria among UK bridging finance brokers during the quarter.
For mortgage brokers, these trends signal a stable and evolving market with more competitive rates and rising application volumes. Increased refinance and auction activity present new business opportunities, while steady demand and sector resilience suggest brokers can confidently recommend bridging loans as flexible solutions for clients seeking alternatives beyond traditional lenders.
“The latest Bridging Trends report highlights a resilient market adapting to current economic conditions,” said Gareth Lewis, deputy chief executive officer at MT Finance. “The reduction in interest rates combined with consistent application volumes suggests a healthy appetite for bridging finance.
“We are also seeing a clear shift in loan purposes, with refinance and auction purchases playing an increasingly significant role. We expect continued sector stability and favourable market conditions throughout 2025 as lenders continue to improve operational efficiency on all fronts.”
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