The UK’s Bridging Market

Is the nature of the bridging loan changing?

The first quarter of 2015 has seen bridging lending exceed £80 million, making it a serious player in the financial market place. Not only has it reached £80 million in the first quarter, but also is currently averaging lending at £50 million a month, which will mean the 2nd quarter, is on target to more than double the previous quarters lending! This growth suggests either bridging loans are becoming more popular or the nature and use of the bridging loan is changing.
Bridging loans, according to the data collected for the first quarter have been mainly used for property refurbishment/development. Also, some 69% of the loans were unregulated, which means they fall into the category of being a commercial loan. There are different rules relating to commercial lending, which mean the bridging loan is a perfect financial tool for businesses.
However, the most significant change in the bridging loan market relates to the period of time the loans are used for. Traditionally, bridging loans were used for very short periods of time with the longest period typically being 3 months, but now the average has moved out to 9 months and many can be significantly longer. One of the main drivers for this is the changing cost. With a growing demand and supply the price of the bridging loan is reducing, and can often replace a mortgage where income multiples don’t stack up.
With the marked change in the period of use of a bridging loan, maybe there is an argument to suggest that this is not a bridging loan at all, and is in fact a new type of lending that helps those in need when the traditional banks won’t. Recent government legislation has severely tied the hands of many traditional lenders.
The bridging loan it would seem is an important means of funding for domestic and commercial purposes, and offers a vital lifeline to those who can’t secure traditional funding.
In view of the changing nature of the bridging loan in the UK’s Bridging Market, maybe we should rename it lifeline funding, something that the banks are very loathe to help with!
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