Bridging finance ever more appealing to investors

Bridging finance has continued to fill in an important gap in those looking to purchase properties under short notice. 

The use of bridging loans, finance or swing finance became prominent following the 2008 recession where high street banks and lenders became more restrictive with their criteria. With the industry worth £1 billion in 2011, it is now worth more than £8 billion, just 10 years later.

However, recent economic changes will see the demand for bridging finance and its role to increase.

With inflation at more than 8% and the Bank of England base rate increasing by 0.5%, this will make the average mortgage more expensive and once again, more restrictive, especially if a recession occurs.

With increasing energy bills and the cost of living set to soar, both homeowners and investors will look for alternative cost saving means. 

Simultaneously, the cost of bridging finance has become more economical, driven by competition from lenders, both new and existing and hundreds of brokers across the country supporting this industry.

Gareth Lewis, commercial director of MT Finance, commented: “The bridging market has been fiercely competitive in recent times which has led to rate reductions, and bespoke pricing being offered. This trend has enabled lenders to create a competitive edge to try and gain market share. However, we are highly unlikely to continue seeing this trend in the coming months.”

“Base rate increases and Swap rate volatility have been ever present in 2022, but their impact has yet to be truly seen in the bridging sector, as it has throughout the mortgage market. As pressure continues to build and funding costs increase, I expect to see the start of movement in our sector in the coming months.”

Bridging loans are often used to complete on properties under a short deadline, helping people to become cash buyers so they can complete. It is perfect for those buying properties at an auction or those looking to finish on a purchase quickly before they have sold their own home or want to avoid competition from other investors and developers. With loans available up to several million, you must usually have an exit to sell the property or refinance within 12 to 24 months, or being a secured asset, you could face repossession.