Second charge lending and auction finance rise as borrowers adapt to geopolitical disruption
Gross contributor lending in the UK bridging market fell 15% in the second quarter of 2025, dropping to £173.1 million from £199.2 million in Q1, according to the latest Bridging Trends report.
The report attributes part of the decline to borrowers delaying transactions at the end of Q1 and the start of Q2, following initial expectations that the conflict in Iran would be brief. As the war has continued, however, many have turned to bridging finance to manage the uncertainty.
Preventing a chain break and purchasing an investment property were the most common uses of bridging loans in Q2, each accounting for 18% of all transactions, compared with 14% and 22% respectively in Q1. The rise in chain-break lending contributed to a significant increase in regulated bridging loans, which grew from 41% in Q1 to 48% in Q2 — the largest quarterly rise since Q1 2022.
Demand for auction finance also increased, rising from 11% in Q1 to 14% in Q2. Heavy refurbishment bridging loans grew from 6% to 10%, while loans used to fund a business injection more than doubled, from 4% to 9%. The proportion of second charge bridging loans rose from 9% in Q1 to 22% in Q2, the highest level since Q1 2021.
Despite the surge in second charge activity, the average monthly interest rate edged down marginally from 0.82% to 0.81%. The average loan-to-value ratio rose from 52% to 55%, remaining well below the 60% threshold.
Average completion times fell from 53 days in Q1 to 46 days in Q2, while the average loan term held steady at 12 months. According to Knowledge Bank, the search terms showing the largest movement among UK bridging brokers were 'cross collateral charges', 'lease extension before completion', and 'holiday lets'.
"The Q2 data should act as a reminder of just how versatile bridging loans can be," said Steve Sanderson, commercial and bridging specialist at Clever Lending. "The fact that more borrowers are utilising second charges to access equity, which some products don't allow, is testament to the support brokers and lenders have been giving their clients to ensure a positive outcome is achieved. I expect this approach to thinking outside of the box to continue well into Q3 and Q4."
"Considering the ongoing uncertainty, it was inevitable that the bridging industry was going to be impacted by global events," said Raphael Benggio (pictured right), bridging director at MT Finance. "Instead of postponing transactions indefinitely, borrowers have just adapted and it is extremely encouraging to see that they continue to be supported by the specialist finance sector."
"Bridging lending continued to shift towards larger and more complex cases in Q2," said Shane Chawatama, sales director at Knowledge Bank. "The search term 'cross collateral charges' was the standout riser for the second consecutive quarter, while 'maximum property value' also saw strong growth, suggesting increased demand for higher-value borrowing. 'Development finance for commercial property' was another notable mover, highlighting continued interest in commercial development opportunities and more sophisticated funding requirements. Commercial properties are continuing to be a good option for investors in the market."
Bridging Trends compiles bridging loan completion data from specialist finance packagers including Adapt, Brightstar Financial, Brilliant Solutions, Capital B, Clever Lending, Clifton Private Finance, Complete FS, Enness, Impact Specialist Finance, LDNfinance, Optimum Elite and Sirius Finance. Broker criteria search data is supplied by Knowledge Bank.
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