Bridging and development finance activity contracted for a second consecutive quarter in Q2 2026, according to the Bridging & Development Lenders Association (BDLA), with completions, applications and loan book values all lower than the three months prior.
Completions across participating lender members totalled £1.6 billion in the three months to 30 June, down 15.2% on Q1. Applications fell more sharply, dropping 26.3% to £7.3 billion, while total reported loan books declined 10.6% to £10.3 billion at the end of June.
The BDLA attributed the slowdown to subdued property transaction activity and extended completion timelines, which it said were putting pressure on new business pipelines and prompting lenders to sharpen their scrutiny of exit strategies. The association said the results reinforced the need for thorough due diligence and realistic assessments of whether borrowers can exit within the agreed loan term.
Development lending held up relatively well in comparison. Loans written totalled £273.5 million in Q2, only marginally below the £276.5 million recorded in Q1. Second charge completions, however, fell more significantly, from £131.3 million to £101.1 million over the same period.
Average loan-to-value ratios edged up to 57.66% from 56.64% in Q1. The reported value of loans in default fell by 0.4% quarter-on-quarter.
"These figures show that the slowdown in lending activity continued into the second quarter of this year, but bridging and development lenders are not alone in experiencing a quieter market," said Adam Tyler, chief executive of the BDLA.
"Feedback from across the property sector is that transaction levels are subdued and deals are often protracted. A slower-moving housing market is putting downward pressure on new business pipelines, with fewer enquiries and applications coming through.
"At the same time, these conditions bring the exit strategy on short-term loans into sharper focus. Where a loan is expected to be exited through a property sale, lenders need to consider not just the anticipated sale price, but how long that sale could realistically take and what alternatives are available if it does not complete within the agreed term.
"What I am hearing from lenders is a greater emphasis on due diligence and on testing those assumptions at the outset. The priority is to support viable transactions with credible exit strategies that reflect the market as it is, rather than relying on expectations of a quicker sale or an improvement in conditions."
Tyler also set out the broader economic consequences of a sustained slowdown in bridging and development activity, noting that its effects extend well beyond specialist lending.
"The economic implications extend well beyond specialist lending. Housing development and property transactions support activity across construction, professional services and the wider economy.
"When activity slows, the effects are felt by many more businesses than those directly involved in providing finance. And this is an important part of the message we're taking into our discussions in Westminster and with organisations including the Bank of England and the British Business Bank.
"The health of the bridging and development finance market is closely connected to wider property activity, housing delivery and business confidence, so understanding what is preventing viable transactions and developments from progressing matters well beyond our own sector.
"That brings the question of housing market stimulus into a wider economic discussion. What's preventing transactions and developments from progressing, is there intervention that would help and what difference would potential measures make?
"Understanding those barriers is central to assessing the 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."
