What we cover in this article:
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.
Have the well-known high street banks ever offered them?
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.
Why did the high street banks stop providing bridging finance?
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.
Are any high street banks still offering bridging loans?
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.
If I can’t use my own bank, who does offer bridging loans?
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 an FCA regulated lender. 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.
How can I find the best deal?
Most lenders don’t advertise their rates online, making it tricky to find the best deal just by doing a quick Google search.
As such, it may be a good idea to work with a reputable bridging loan broker when comparing your options. Alternatively try out our online bridging loan comparison tool to find out what rates you may be eligible for within minutes.
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.