Do High Street Banks Still Offer Bridging Loans?

Read on below to find out more about high street banks and their role in bridging finance, alternative to high street bridging finance and the role of a challenger bank.

What is a bridging loan?

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 and must be a regulated bridging loan.

Do high street banks still offer bridging loans?

In short, no, high street banks no longer offer bridging loans.

The main forms of finance offered by high street banks are mortgages, unsecured loans, credit cards, business loans, invoice finance and overdrafts.

Have the well-known high street banks ever offered them?

Yes, many high street banks offered bridging finance right up to the credit crunch in 2008, including Barclays, HSBC, NatWest, Lloyds and RBS.

Bridging loans offered by high street banks were limited to very vanilla chain break applications, and were usually only offered to existing bank or mortgage customers.

Bad credit was usually an instant decline and anything non-standard, such as heavy refurbishment or commercial bridging loans, were also an instant ‘no’.

Why did the high street banks stop providing bridging finance?

In the build-up, and during the credit crunch of 2008, high street banks restricted lending across all products, including standard residential mortgages.

Due to the risk profile model used by high street banks, they pulled out of any lending that could be deemed risky. Bridging loans can be seen to be riskier by lenders due to the short-term nature of the loan.

As high street banks mainly offered chain break bridging finance, reliant on a property selling to repay the loan, this was a huge risk. With property values falling and the property market becoming stagnant, short-term secured finance was one of the first things to be halted.

Are any high street banks still offering bridging loans?

High street banks still don’t offer bridging loans directly to customers. Some bridging loan lenders do borrow their funds from high street banks and in-turn, these products are offered to brokers and borrowers alike.

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.

If I can’t use my own bank, who does offer bridging loans?

The bridging loan market is now booming and there are more and more specialist bridging lenders available. These lenders are made up of challenger banks, specialist independent lenders and privately funded lenders.

Most of the lenders aren’t household names and in most cases, aren’t generally known by the public, unless they have a strong knowledge of bridging.  It can therefore be a trickier to know who you’re dealing with when looking at potential lenders.

If you are looking to borrow against a property you live, or plan on moving into, an FCA regulated bridging loan will be needed. If the bridging finance lender is FCA regulated, it should give you confidence in dealing with them. They are held to a higher standard in how they treat their customers. Even for unregulated loans, that may offer you a greater peace of mind that you’re dealing with a reputable company.

If working with a non-regulated lender, it doesn’t mean that they can’t be trusted, however you should still choose wisely. Many unregulated bridging loan lenders treat you with the same standards as FCA regulated lenders. The difference is that you are not covered by the FCA when dealing with an investment property, much like a standard buy to let mortgage.

What is a challenger bank?

Challenger banks are banks that have effectively been set up to compete with high street banks.

Some offer low interest rates, comparable with the high street and also offer similar products such as residential mortgages, commercial mortgages, loans and credit cards.

How can I find the best deal?

You can speak with lenders and compare bridging loans yourself, however this can be time consuming.

As such, it may be a good idea to work with a reputable bridging loan broker when comparing your options. A good broker will help you to find the best deal, meaning you can get the best interest rates and fees. If your loan is for a more complex need, such as development exit finance, a large bridging loan or property refurbishment finance, it’s a broker can be a real help.

Some, but not all, brokers charge a fee for their service, which can add to your costs. We don’t charge a fee when arranging bridging loans.

Read more – How Do Bridging Loans Compare‌ To Mortgages? or Are Bridging Loans Available Nationwide?