James Bloom

Is bridging part of your broker toolkit?




The UK bridging market is going from strength to strength with more than £4bn of bridging loans written last year — an increase of 15% on 2017 — according to the Association of Short Term Lenders.

Further growth is expected in 2019, with research conducted by Masthaven identifying short-term finance as one of the top three growth areas for this year.

However, despite this increase, bridging loans remain underutilised. Masthaven’s sales team estimates that only 10–20% of brokers currently use bridging loans as a financial tool, with many unaware of the untapped potential this area of the lending market has to offer clients looking for short-term financial solutions.

One of the reasons for the lack of awareness is that bridging loans are often perceived to be a niche and underdeveloped area of the lending market. However, this is no longer the case. The continued uncertainty around Brexit and the unsteady economic and political landscape globally means bridging finance is fast becoming a popular tool for those seeking fast and effective financial solutions for their many different needs.

In fact, as the financial demands and needs of everyday life continue to evolve, what has previously been considered specialist finance can actually now be viewed as fairly mainstream and, in many cases, suitable for a wide range of borrowers.

Traditionally, bridging loans have been used to complete the purchase of a property before a customer has sold their existing home. By taking out a 12-month loan to ‘bridge’ the gap in property chains, the loan enables the client to ensure the property chain can complete and that they can secure the home of their dreams.

Although bridging loans are still used in this way, they are also used as an effective short-term financial mechanism by homeowners, investors and businesses as an interim funding option. In a growing number of cases, many clients are taking out a bridging loan on their main residence and using the funds towards a development project they are undertaking, such as home refurbishments, small-scale extensions and barn or loft conversions.

Similarly, many customers are also using a bridging loan for a quick release of equity on their home to pay tax bills, consolidate debt or to downsize their home. This is because bridging funds can be released much quicker than traditional loans and, as a result, provide property owners with greater flexibility.

Bridging loans are not only for personal use. They can also be used for business purposes, such as the purchase or remortgage of commercial or semi-commercial property until long-term finance can be arranged or for investing money into a business where funds are urgently needed. Using a bridging loan in this way allows businesses to raise much-needed capital quickly when access to funds may be limited.

With such an extensive range of uses, it is no wonder bridging loans are increasing in popularity. The speed and flexibility with which funds can be released and the short-term nature of the products means they are an attractive and increasingly popular product for customers looking for a quick cash injection tailored to their needs. This makes them a very important tool and one I firmly believe should be in every broker’s locker.

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