How did the specialist finance market fare in 2022 and what bridging trends could emerge in 2023?

bridging trends

We faced a challenging year in 2022. Rising interest rates, a cost-of-living crisis, and political instability put the wider economy under pressure. The property industry was not immune to this. Mainstream lenders struggled to lend, while many borrowers faced fresh affordability issues.

But, despite all the negative sentiment, the bridging market went from strength to strength in 2022. As high-street banks shied away from the challenges, bridging companies emerged to support property investors.

As we face down 2023, let’s explore how our industry fared in 2022, and what bridging trends could be on the horizon for the months ahead.

A good year for bridging

The specialist finance industry supported property investors in record numbers last year. In Q1, short-term finance, arguably, made a slow start. According to ASTL data, completions fell to £1.04bn, from £1.24bn in the final months of 2021. Applications and loan book sizes also dropped.

But, we saw a quick rebound in Q2 – with the momentum continuing upwards as we headed into the 2nd half of the year. Completions alone were over £1.4bn in the three months to September. An increase of 15.9% on Q2. This also represented the sixth consecutive quarter where completions topped the £1bn mark.

Demand also showed few signs of slowing down. Bridging applications reached £7.9bn in Q3, up by 5.4%. Loan books grew by 1.5%, reaching a new high of £6.1bn. Borrowers appeared to recognise the crucial role specialist finance plays when difficulties emerge in the wider market.

Ever since the Bank of England started hiking the base rate at the end of 2021, bridging lending rose by almost 50%, according to Revolution Finance Brokers. Much of this being used for chain breaks and investment properties.

We also saw some notable shifts in where this demand was coming from throughout the year. Between Q2 and Q3, bridge loans for investment purchases dropped. While loans for business purposes nearly doubled.

Source: Bridging Loan Directory, Which?, Bridging Trends, Bridging Trends, Financial Reporter

Bridging trends at MFS

Here at MFS, we reached several of our own milestones in 2022. Not only did we boost our bridging capabilities, but we also moved into entirely new markets.

Over the last 12 months or so, we secured multiple funding lines from institutional investors. We’ve secured over £800m in funding and are on track to having a £1.2bn loan book by early 2023.

We also brought our specialist expertise to the mortgage market. In January, we launched a buy-to-let mortgage product to support Britain’s landlords. Thus far, The product has been used extensively by those needing specialist solutions to complex or unusual requirements.

Evidently, there is still plenty of confidence in the specialist finance industry.

The property market in 2022

Ultimately, this confidence is supported by the underlying investments. Countless headlines were dedicated to the property market’s downfall in 2022. But we still saw positive movements throughout the year.

The latest data from the Land Registry shows average prices across all property types in the UK grew from £273,370 in January 2022, to £296,422 in October. While Nationwide’s HPI showed house prices fell in Q4, the pace is slowing down. In December, the average price fell by 0.1% month-on-month. A much smaller drop than what was seen in November and October.

While prices may have faced pressure in late 2022, demand was still there. Foreign investors flooded London with money, taking advantage of a weakened pound. New builds were bought up en masse in regions such as East Midlands, the West Midlands, Scotland, and the East of England. Also, while landlords faced their own difficulties in 2022, average rents across the UK rose by over 10% last year, according to Ocasa.

Source: Land Registry, The Guardian, Property Notify, Property Reporter

Thoughts on bridging trends in 2023

Many expect prices will drop further in 2023. But oncoming legislative changes could force movement in the market. Capital gains tax, dividend allowances, and help to buy support will be rolled back over the coming months. Homeowners may sell up while they can, creating opportunities for property investors.

But, buyers may only have a short window of opportunity to take advantage of reduced property prices. Indeed, Savills have forecasted that growth will resume in 2024, with prime central London values rising by 13.5% into 2027. Speed may prove crucial in taking advantage of these short-term discounts, influencing bridging trends in 2023.

Also, we may see bridging trends shift more towards upgrading existing assets, as opposed to the purchasing of more properties. New laws could force landlords and homeowners to invest in bringing their properties up to scratch.

We’re all aware of the oncoming EPC changes. But additionally, Michael Gove has vowed to improve planning rules and introduce rental reforms this year. We could see ramped up demand for permitted & light development bridge loans as properties become required to meet new thresholds.

Bridging trends in 2023 will be swayed by the market and wider economic climate. Uncertainty still abounds. But while we’ll never be able to fully predict everything that lies ahead, we’ll remain committed to the elements that work in both good times and bad.

Regardless of what your plans are for the months ahead, we vow to provide speed, flexibility, and commitment for your property investment goals.

Source: Property Industry Eye, Landlord Zone, Homebuilding & Renovating


MFS are a bridging loan and buy-to-let mortgage provider, not financial advisors. Therefore, Investors are encouraged to seek professional advice.

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