Bridging finance is seeing a rapid growth in popularity, availability and affordabilityMake Text Bigger
There has been a significant shift towards bridging finance, especially in the residential property market. The high street banks are curbing their lending making it more difficult to apply for finance, but with demand for borrowing on the increase, bridging finance lenders have moved into the market to fill the gap.
Falling interest rates have also contributed to the rapid growth of the bridging industry. Bridging loan rates have fallen since the start of 2009 in line with market trends, and this has encouraged more investors to use bridging finance to fund their projects. The trend of declining rates continued in Q1 2012, with the average rate falling from 1.41% per month in Q4 2011 to 1.38%. The average rate also fell year-on-year – it was 1.52% in Q1 2011. We currently have bridging lenders on our panel that will offer rates as low as 0.7% per month.
There is now a good choice of lenders offering a wide range of facilities to suit most requirements. Bridging products are generally considered more expensive than traditional sources of funding, but the costs set against the gains to be made in speed and flexibility often make Bridging solutions more efficient.
The ability of bridging lenders to provide quick decisions, sometimes almost instantaneously, and their ability to offer and complete within a matter of days, makes for the ideal solution where you have to move quickly to get the property at the price you want.
Here are some of the headlines that hit the financial press within the last week.
- Gross Bridging lending forecast to hit £1.5 billion by end of 2012
- Bridging lenders step in to fill funding gap left by high street banks
- Buy to let investors turning to bridging as buy-to-let mortgage lending declines
- Volume of bridging loans 74% higher year-on-year
As new entrants come into the market on what seems like a weekly basis, it is important to understand the following points that should be considered when investigating Bridging finance:
- What are the arrangement fees and which lenders don’t charge fees?
- Will the interest have to be serviced during the course of the loan?
- Who will lend on the Open Market Value and which lenders will only lend on the lower of the purchase price or the 90 day value?
- What are the exit fees and are they based on the loan amount or the GDV?
- Which lenders lend in specific geographical areas and on what types of property?
- What is the exit route?
- What are the default rates?
The next article will look at the wide variety of uses for bridging finance and the advantages it holds over other types of funding available.
If you would like some assistance yourself or just have a chat about a potential project, please click on the appropriate link below or call us on 01603 489118.
Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.