A bridging loan, also known as bridging finance is a type of short-term loan which is secured against property. They are arranged to bridge a short gap between two events taking place – for example buying a new property before selling your existing one.
These loans are usually arranged for 1-24 months. When secured against your own home, your term is restricted to a maximum of 12 months.
Yes, most of the big banks offered them prior to the credit crunch in 2008, including Barclays, HSBC, NatWest, Lloyds and RBS.
They usually restricted borrowing to their existing customers and usually only for prime applications. This meant that most loans were very short-term and just in place to plug gaps in a sales chain. Bad credit was usually frowned upon and loans restricted to residential property only.
During the credit crunch, high street banks restricted lending across all products, with even residential mortgages becoming difficult to come by.
This trend continued, as specialist lenders picked up the mantle and continued to lend during this period, gaining market share.
For lenders, bridging loans are higher risk by nature, as they’re very short-term and usually rely on external factors coming together (such as sales) for the loan to be repaid.
Ultimately, the decision came down to a desire to reduce risk, and when cutting back on lending, bridging was a natural choice to let go.
Not directly. Some banks offer funding lines to bridging loan lenders, who then lend the funds out to their borrowers.
Most bridging lenders have multiple funding lines, and don’t normally advertise who they’re borrowing from, making it difficult to track.
In these cases, the high street bank in question is unlikely to publicly advertise that they’re backing a bridging loan lender and won’t have a clear customer referral process in place. In many cases, customer facing staff will also be unaware of these arrangements.
The market is now dominated by a more specialist group of lenders. These lenders are made up of challenger banks, specialist independent lenders and privately funded lenders.
Most of the lenders aren’t household names, so it can be a little trickier to know who you’re dealing with when looking at potential lenders.
A good start when choosing a lender is to look to work with a lender who is well established with a great reputation.
Most lenders don’t advertise their rates online, making it tricky to find the best deal just by doing a quick Google search.
We underwrite our group loans so we can be very competitive with our rates, we also don't charge a Broker fee.
