Defaults are moving the other way
Bridging and development completions fell to £1.6 billion in Q2 2026 from £2.3 billion a year earlier, and the Bridging & Development Lenders Association (BDLA) says slower house sales are prompting lenders to look more closely at how and when borrowers will repay.
Over the year, applications fell from £10.2 billion to £7.3 billion and total reported loan books from £13.1 billion to £10.3 billion. Quarter-on-quarter, applications were down 26.3%, completions 15.2% and loan books 10.6%.
Applications reached their index high of £11.7 billion in Q4 2025, when completions stood at £2.5 billion and loan books at £13.4 billion.
Q3 2025 recorded applications of £11.4 billion, completions of £2.5 billion and loan books of £13.7 billion, while Q1 2026 saw £9.9 billion, £1.8 billion and £11.5 billion respectively.
Exits under the microscope
The BDLA said market feedback points to subdued transactions and often protracted completion times, putting pressure on new business pipelines and sharpening lenders' focus on exit strategies.
Chief executive Adam Tyler said bridging and development lenders "are not alone in experiencing a quieter market."
"A slower-moving housing market is putting downward pressure on new business pipelines, with fewer enquiries and applications coming through," he said.
Where a loan relies on a property sale, Tyler said lenders need to consider "how long that sale could realistically take and what alternatives are available if it does not complete within the agreed term."
He said lenders had told him they were placing greater weight on due diligence and testing assumptions at the outset, supporting viable deals with credible exits rather than relying on a quicker sale or improving conditions.
TwentyCi data shows UK sales agreed have been more than 5% lower year-on-year for four consecutive months, pointing to a weaker completions pipeline in Q4. The firm forecasts 1.16 million residential transactions in 2026, down 3.9% on 2025.
Fixed-rate pricing, relevant to borrowers refinancing out of a bridge, has also risen. Moneyfacts said the two-year swap rate reached 4.26% on 3 September, up from 4.06% a month earlier, and the average two-year fixed rate rose to 5.63% in early September.
Bridging Trends data showed gross contributor lending down 15% to £173.1 million in Q2 2026, partly because borrowers delayed deals expecting the conflict in Iran to be brief. Average completion times fell from 53 to 46 days, while average loan-to-value (LTV) rose from 52% to 55%.
Beneath the headline numbers
Development lending fell less sharply, with £273.5 million written against £276.5 million in Q1. Second charge completions fell to £101.1 million from £131.3 million.
Average LTV ratios rose to 57.66% from 56.64%, and the reported value of loans in default fell by 0.4% quarter-on-quarter. The survey is compiled by independent auditors from participating lender members' figures.
Steve Barber, managing director of Bridging Finance Solutions, said in June that the BDLA figures exclude private lending between individuals and through solicitors.
Capital turns cautious
In the Interpath and BDLA Bridging Market Survey 2026, published in June, 35% of respondents forecast origination growth, down from 75% previously. Some 46% expected institutional funding appetite to decline over the coming year.
Of the survey's 46 participants, 65% named macroeconomic uncertainty their primary concern, up from 39% in 2025.
"The economic implications extend well beyond specialist lending," Tyler said, adding that housing development and property transactions support construction, professional services and the wider economy.
The S&P Global UK Construction PMI stood at 44.3 in August, with residential activity at 37.6, while new build completions in England fell to 202,800 in 2025, the lowest since 2015.
"When activity slows, the effects are felt by many more businesses than those directly involved in providing finance," Tyler said. He said this forms part of the BDLA's discussions in Westminster and with organisations including the Bank of England and the British Business Bank.
He said the sector's health is closely connected to property activity, housing delivery and business confidence, which makes the barriers facing viable transactions and developments a wider economic question, including on housing market stimulus.
The British Business Bank's ENABLE Build programme guarantees part of lenders' losses on development finance portfolios to increase lending to SME housebuilders in England.
"What's preventing transactions and developments from progressing, is there intervention that would help and what difference would potential measures make?" Tyler asked.
Chancellor John Healey will deliver the Autumn Budget on October 28, 2026.
Tyler said understanding those barriers was central to assessing effects on transaction activity, housing supply and affordability.
"The BDLA will continue to contribute market evidence to those discussions, while supporting the professional standards and responsible lending practices that underpin our sector," he said.
