The recent raft of Bank of England interest rate hikes and subsequent mortgage rate increases came as no real surprise. Quite the opposite, as it had been common knowledge for some time that the historic lows the UK had become used to were on borrowed time.

Today, we are looking at a picture where millions of mortgage payers have found themselves struggling to make ends meet. Having signed up for ultra-low-interest fixed-rate deals some time ago, they have now been switched to standard variable-rate products with much higher rates of interest.

Elsewhere, you have those who are struggling to qualify for new mortgage loans in the first place, something that is not just affecting everyday home buyers but is also having a major impact on the property purchase decisions of BTL investors.

Meeting ICR requirements

Increasingly, BTL investors are finding it difficult to meet the interest cover ratio (ICR) set by major lenders as a key aspect of their eligibility requirements. This is where the interest payments on a buy-to-let mortgage are compared with projected rental income.

Typically, BTL lenders have a minimum ICR requirement of around 145%. Unfortunately, this means that the recent interest rate hikes (and the prospect of further hikes to come) mean that BTL investors must now produce evidence of higher projected rental income on the properties they plan to purchase.

Something that inherently means hiking monthly rents and potentially making their properties less attractive to prospective tenants could also be completely out of the question in some scenarios, such as a property with a reliable long-term tenant already in place that you would like to hang onto.

Bridging the gap

Over the past couple of years, investors looking to pick up BTL homes with high potential have been demonstrating greater interest than ever before in bridging finance. Bridging loans work in an entirely different way from conventional mortgages, in that they are strictly short-term solutions.

A bridging loan is a secured loan issued over a term of up to 12 months and, in many instances, can be arranged within a few working days. The loan is secured against assets of value (usually residential or commercial property), and the funds raised can be used for any legal purpose.

All of this has made bridging finance particularly attractive to investors in search of more flexible and accessible options than conventional BTL mortgages. With a bridging loan, there are no minimum ICR requirements whatsoever, and you do not need to provide any evidence of a background in property investments.

If you have sufficient assets of value to cover the costs of the loan and a workable exit strategy (how the loan will be repaid), this is often all that matters to bridging loan specialists.

This can help BTL property investors bridge the gaps in the services being provided by mainstream lenders. With a bridging loan, a buyer can purchase a high-potential BTL property in any condition and conduct the renovations and improvements necessary to bring it up to scratch. Interest then accrues at a rate as low as 0.5% per month, giving the investor plenty of time to work out their next step.

When the agreed loan term ends, the bridging loan can be refinanced onto a longer-term facility, such as a BTL mortgage. Or if rates are still far from agreeable, the property can be sold to generate significant capital gains and repay the loan in full.

Essentially, bridging finance is about giving investors welcome breathing space, during which they can think carefully about their longer-term decisions.

Most homeowners looking to relocate barely think twice about completing a mortgage application. They simply apply for and (perhaps) receive a mortgage instinctively, locking themselves into the same binding long-term agreements as everyone else.

But what if there was a better way for existing homeowners to move to new homes without going down the usually complex and costly channels? Are there flexible, accessible, and affordable alternatives to conventional mortgage loans that are broadly available to mainstream borrowers?

Surprisingly, the answer is yes, and it takes the form of bridging finance.

To put the whole thing into some kind of perspective, here are just six of the countless ways a bridging loan can be better than a mortgage:

• Faster applications: With a mortgage application, it is not uncommon to wait up to 8 or even 12 weeks to gain access to the money you need. With bridging finance, the whole process can be wrapped up in just a few working days, never more than a couple of weeks. When time is a factor (which has a tendency to apply to all property purchases these days), bridging finance can be so much faster to arrange than a conventional mortgage.
• Property purchases for cash: With bridging finance, you essentially turn yourself into a cash buyer. By doing so, you gain access to all the benefits usually reserved for those who buy homes for cash. You can bid on properties at auction, you can place offers on off-market properties of all kinds, and you can qualify for preferential rates by buying your next home for a single (and fast) lump-sum cash payment.
• Easy to obtain: Comparatively speaking, obtaining a bridging loan can be surprisingly straightforward. Eligibility criteria for bridging loans tend to be much more relaxed than with a conventional mortgage. Your credit history and income level will not necessarily stand in your way, just as long as you provide your lender with proof of a viable exit strategy (how you intend to repay your loan). It is even possible to qualify for bridging finance with no formal proof of income and/or a history of bankruptcy.
• Can be used to purchase any property: Major banks place heavy restrictions on the kinds of properties their mortgages can be used to purchase. Elsewhere, bridging loan specialists place no such restrictions whatsoever on their products. If you qualify for a bridging loan, you can use the funds to purchase any type of property you like. This includes properties that would normally be considered ‘not mortgageable’, making it much easier to pick up homes in questionable conditions to then renovate to a higher standard.
• Rock-bottom interest rates: Bridging finance is designed to be repaid as promptly as possible and can be hugely affordable as a short-term solution. Interest is applied monthly at a rate as low as 0.5%, and all other borrowing costs are kept to the bare minimum. Most bridging finance specialists impose no fees or penalties for early repayment, meaning significant sums of money can be saved by repaying the full balance as quickly as possible. Unlike a mortgage, where early repayment can be extremely expensive, assuming it is even an option at all,
• No restrictions on spending: A traditional mortgage comes with the caveat of being issued exclusively for the purchase of a property. With bridging finance, the money can be used for absolutely any legal purpose whatsoever. You could use a chunk of the money to purchase a home or business property and spend the rest in any way you like. Lenders have little to no interest in how their money is to be used; they simply need to know that they will get it back in full and on time.

For the first time this year, average bridging loan interest rates increased slightly in Q3. But rather than adversely affecting the sector’s popularity and performance, data from Bridging Trends indicates quite the opposite. In the face of adversity, the UK’s bridging finance sector enjoyed its strongest quarter on record in terms of gross contributor lending.

Compared to Q2, quarterly performance increased by a huge 30% in Q3; a total of £214.7 million in bridging loans was transacted across the UK, up from £178.4 million in Q2. This is the highest combined contributor lending total recorded since 2015, when Bridging Trends was launched.

(Click to enlarge).

Of equal significance, the Bridging Trends report also showed a major shift in how bridging loans are being used by UK borrowers. For the first time, preventing a property chain break became the top use for bridging finance, accounting for a full 22% of all transactions (up from 21% in the previous quarter).

This bucked the trend of the five prior consecutive quarters when purchasing investment properties was the most common use for bridging finance.

“Following the base rate rises we’ve seen throughout this year and mortgage interest rates increasing across the industry, it’s no surprise that chain break bridging is the biggest use of funds for the quarter,” said Stephen Watts, Bridging & Development Finance Specialist at Brightstar.

“Borrowers that have had mortgage products withdrawn from them with little or no notice or have lost their sale due to their buyers no longer fitting mortgage affordability criteria would then turn to short-term funding solutions to ensure their purchase can still go through as planned. It will be interesting to see how this impacts next quarter’s data.”

Attributed largely to the growing uncertainty that continues to plague the UK economy, the use of bridging finance for investment property purchases plummeted from 24% in Q2 to 16% in Q3.

Interest rates are up slightly

Meanwhile, the average monthly interest rate payable on a bridging loan increased slightly for the first time, up from 0.69% in Q2 to 0.73% in Q3. However, this seemingly had no impact whatsoever on overall bridging activity, which reached a new record high between July and September.

There was also a slight increase in the average loan-to-value level of bridging products issued in Q3—up from 56.2% in Q2 to 59.6%. Regulated bridging loans accounted for 45.2% of all transactions, up slightly from 43.3% in the previous quarter. Average completion times increased slightly to 60 days in Q3 (an increase of three days compared to Q2), which may be a reflection of the record demand for bridging finance also recorded during this period.

While average interest rates continue to hover close to previous record lows, experts believe that further increases over the coming months may be all but inevitable.

“Considering the volumes we have seen in Q3, bridging finance clearly continues to be a useful tool for homeowners and investors alike. What has been interesting is the drop-off in bridging being utilised for investment purchases, which is likely due to buyers taking stock of the current market. While it’s too early for us to really feel the impact of September’s mini-budget, I expect this will be more visible in Q4,” said Gareth Lewis, Commercial Director at MT Finance.

“As predicted in Q2, interest rates have started to slowly rise to 0.73%, but it is worth noting they are virtually on par with Q3 in 2021 (0.72%). What comes next remains to be seen, but I would not be surprised if interest rates continue to rise and investors remain cautious.”

As things stand, you would be hard-pressed to find anyone with genuine optimism for the immediate economic outlook. Inflation in the UK is already hovering close to 11%, but experts are increasingly predicting a peak of almost 19% in the early stages of next year. All of this is likely to make the current living-cost crisis seem insignificant when compared with the economic hardship to come.

Consumer confidence is as low as it gets, average wages are in no way keeping up with escalating living costs, and people are being forced to make all sorts of modifications to their spending patterns simply to make ends meet.

Sadly, experts like Nick Jones, sales director for bridging finance at lender West One Loans, only see things getting worse before they get better.

Flexible finance in troubled times

But while the overall picture is somewhat pessimistic, it may not all be doom and gloom. With the growing availability and affordability of bridging finance, more people and businesses than ever before will at least be able to tide themselves over if facing a temporary economic shortfall.

There will even be those who are able to capitalise on the economic downturn in order to make the best of a bad situation.

“There will be opportunities for customers who are looking to expand their portfolios and make investments, and we will be here to support them,” said Jones.

Elsewhere, bridging and development finance specialist at Brightstar, Stephen Watts, indicated that “bridging finance is being increasingly sought to enable buyers to put themselves ahead of their competition”.

With available housing inventory continuing to outstrip supply by a considerable margin, those able to do so are setting their sights on potentially profitable property investments. And in many cases, they use short-term bridging loans to expand their portfolios at relatively short notice.

Figures from the most recent Bridging Trends Report found that, in spite of the current economic chaos, bridging loan volumes for Q2 this year were up 14%. Throughout the first six months of 2022, the most popular application for bridging finance was picking up an investment property.

The speed and simplicity of home buyers and investors looking to take advantage of time-critical property purchase opportunities. Not to mention, jump the queue and escape the trappings of conventional property chains entirely.

Cash buyer benefits

But it is not just the UK’s more established property investors that are finding bridging finance a useful facility. Conventional homebuyers are finding it increasingly difficult to secure property purchases via conventional channels.

Today, the typical mortgage application takes approximately 12 weeks to underwrite, authorise, and issue. In the meantime, competing buyers have up to three months to submit a superior offer and beat you to the punch.

Coupled with the risk of the seller simply pulling out of the deal at any time, conventional home purchases are becoming increasingly difficult.

With bridging finance, homebuyers can gain access to the benefits of purchasing properties as cash buyers. They borrow against their current home, they fund the purchase of their next home in a matter of days, and they beat all competing bidders to the punch.

In doing so, they eliminate the risk of being gazumped at the last minute and benefit from the property price discounts afforded exclusively to cash buyers (often up to 2% of the total property price).

For as long as the economic situation in the UK remains unstable, the appeal of bridging finance will continue to grow. Particularly for those who are asset-rich but cash-poor, bridging finance can be the ultimate affordable stopgap solution for times of economic turbulence.

So you have dreamt about starting your own farming business but don’t know where to start. Today we will be looking at how to get started, the pros and cons, and most importantly, what kind of funding is available to you.

Running a farm is not an easy prospect, and it is vital that you understand exactly what you are taking on before you start the process.

Important things to consider when starting a farm

Before you start, you must decide on what kind of farm you will be starting, which will be determined by aspects such as weather and location. You will need to be realistic about your options and budget so that you can be sure that you have taken all financial implications into account, such as technological investments, employee costs, repairs, and maintenance, amongst others.

Demand for what you are farming should be carefully considered, and it is vital that there is a market for your produce for your farm to be successful. While the idea of farming may seem like an attractive option, there are many eventualities that could lead to disaster, including floods, droughts, market price crashes, operating cost increases, and poor crop yields, to name but a few. Investing in effective irrigation systems and water tanks can go a long way towards tackling some of these issues; however, that comes at a price that will need to be factored into the overall cost when looking for funding for your new farm business.

If you are planning to farm livestock, you will need to have a good veterinarian with plenty of experience with farm animals. Waste management for livestock farming is also of paramount importance, and you will need to stay on top of it. Manure can be collected and used as fertiliser or sold for profit.

The next important thing to consider is what technology will be required for the type of farming you plan to do. Technology may include, but is not limited to, machinery, tools, specialist software, and livestock tracking devices. It is vital to keep all software up-to-date in order to get the best out of the technology you will be utilising. It is worth investing in items that will prolong the life of your machinery, such as rain covers and sheds.

Knowing your crop well and when to plant is absolutely imperative to being a successful farmer. It is also advisable to rotate your crops, as planting the same crop year after year can result in pest and disease issues. Soil conservation is just as important, so efficient soil testing will be essential.

Advantages and disadvantages of managing your own farm

While starting a farm may be the perfect choice for you, it is worth looking at the pros and cons, as running a successful farm can be a lot harder than you may imagine.

Advantages

If you do your research on consumer demand before deciding whether you are going to invest in livestock or agricultural farming, you will be halfway to a profitable future. The demand for farm produce, whether it be fruit, vegetables, meat, or wool, will always be there, making it a potentially very lucrative endeavour. Pricing things correctly will, of course, be the key to success, as will looking at your competition and marketing yourself and your products effectively.

The opportunity to diversify is also a big advantage when it comes to farming. You will not need to stick to one type of crop or livestock and can mix both if you wish to. Other forms of income can also be looked at, such as a petting zoo or a bed and breakfast. These opportunities can potentially generate some further income for you.

Another advantage is the sense of achievement you will experience when farming in a way that gives back to the environment and the local area. You will reap health benefits from being outdoors, and as farming is quite a physical job, it will go a long way towards keeping you fit and in shape.

Disadvantages

As there is always a downside to nearly everything, it is advisable to consider these before taking the leap into farming.

One of the main cons is that you will, at some point or another, have to cope with extreme weather. If the great outdoors is not for you, then it is probably safe to say that neither is the life of a farmer. Early starts, around 5 a.m., are typical, so if you are not a morning person, then this is not the career for you.

Harsh weather is not only hard for the farmer but can be detrimental to crops, particularly in the winter months. Strong winds, snow, and rain can ruin crops, especially when it is not the typical weather for the season. With global warming causing unpredictable weather such as extremely high temperatures, droughts, and floods, it can be difficult to predict what lies ahead. High winds can also damage farm property, such as fences and buildings.

Farming is also extremely hard work and is not for the fainthearted. Twelve-hour days are typical, and time off can be difficult as farm duties don’t stop. You will need to be physically fit and mentally strong to work in this industry. Hiring staff will alleviate these issues so that you can take a break at times.

Financing your farm with an agricultural bridging loan

Once you have done your homework and decided that managing a farm is perfect for you, you will need to work out what funding you will need to get started.

Agricultural bridging finance is available for those looking to start a farming business and is designed to provide short-term funding, typically between 1 month and 3 years. As it is a secured loan, the amount you can borrow will depend on the value of the assets you offer as collateral.

There are many uses for an agricultural bridging loan, including quick land purchases. As bridging finance can be arranged faster than other types of loans, it is an attractive option for those looking to buy quickly, particularly if you find a fantastic deal that requires you to act fast in order to secure the land.

Short-term funding, such as bridging finance, can also be used to purchase expensive agricultural machinery such as tractors, harvesters, feeding systems, etc.

Agricultural bridging loans can also be used for farmers wishing to diversify and move into other areas, for example, a zoo or café, which can be very costly but can be funded with short-term finance.

As farming can be somewhat risky due to weather and other external factors, sometimes funds are required to repair, recover, and restructure when there have been unexpected issues. Due to the speed at which an agricultural loan can be arranged, you will be able to get things back on track faster than if you were to take out a more traditional loan product, which will take significantly longer to arrange.

For livestock farmers, existing livestock, which is considered a tangible asset, can be used as security in order to secure a bridging loan to buy more. This gives you the opportunity to expand the business and increase profitability. Agricultural bridging finance is used by farmers a lot due to the ever-changing and often unexpected changes that occur in this industry when funding is needed fast until longer-term loans can be arranged. For this purpose, this type of loan product is the best solution; however, it is imperative that you consult with a specialist broker who is experienced in this area and can give you all the advice you need and help you secure the best deal.

Bridging finance specialists across the UK have noted an uptick in applications from parents looking to help get their kids on the property ladder. Not that this is particularly surprising when considering the unprecedented difficulties being faced by first-time buyers.

In May, the average house price in the UK hit another record high of £289,099. This represents an increase of more than £2,850 from the previous month or 1%. House prices have now soared to record highs for 11 consecutive months and are up an astonishing 10.5% from the same time last year.

The likelihood of house prices falling over the coming months is minimal, but there are at least signs of a modest slowdown in house price acceleration.

“Yes, prices have still risen 1 per cent on the month, marking the eleventh successive monthly increase, and yes, prices are up by 10.5 per cent on the year, keeping annual price growth in double digits, but this is the slowest rate of growth since the start of the year and shows the challenges ahead cannot be ignored,” commented Alice Haine, Personal Finance Analyst at investment platform Best Invest.

“With mortgage rates surging, following four consecutive interest rate rises from the Bank of England since December and further hikes expected this year, and inflation of 9 per cent eating into real incomes, it is only natural that prospective buyers may take a pause before plunging into the market right now.

“Add in the cost-of-living crisis and the fact fuel prices are now at record highs [petrol prices set a new average record of 178.5p per litre on Tuesday], and the cost of buying a home may deter those already struggling to meet their monthly obligations.”

Insurmountable costs for first-time buyers

Speaking on behalf of Halifax, managing director Russell Galley highlighted how impossibly expensive it is becoming to buy property in the UK.

“For house hunters, the extent of the impact of property price inflation continues to be linked to the type of home they are looking to buy,” he said.

“Compared to May last year, you would need around £10,000 more to buy a flat, but an additional £50,000 for a detached home.”

“This clearly creates a knock-on effect for those looking to make their first home move, as the rungs on the housing ladder have become increasingly wide.”

For first-time buyers, pulling together a ten per cent deposit for an average UK home now means saving at least £30,000. Where lenders insist on 15% or 20% deposits, the figure could be as high as £60,000.

Even last year, when average house prices were lower than today, data from Barclays indicates that the average deposit paid by a sole first-time buyer was £61,100.

This is the kind of money the typical first-time buyer simply cannot come up with. Faced with an escalated cost-of-living crisis, the dream of homeownership for millions of prospective buyers is likely to remain just that.

House prices are up a staggering £123,016 (or 74%) over the past decade, during which wages for many have stagnated.

Tomer Aboody, director of property lender MT Finance, said: “With prices rising by 74% in the past decade, it shows just how much the market is running away from first-time buyers,” commented Tomer Aboody, director of property lender MT Finance.

The bank of mom and dad

Traditionally, parents looking to help their children get on the property ladder have provided financial support in the form of a contribution to their deposit. With deposit requirements at an all-time high, many first-time buyers are finding this the only realistic way to qualify for a mortgage.

Elsewhere, first-time buyers (and their families) are setting their sights on properties away from the conventional housing market. With affordability and accessibility in mind, many are looking to purchase properties in need of renovations and repairs with the aim of gradually moulding them into their dream homes.

This approach has generally proved problematic for first-time buyers seeking funding from mainstream lenders. The vast majority of High Street banks are unwilling to lend against properties in a poor state of repair, which are often categorised as ‘not mortgageable’.

For example, if a property lacks a functional kitchen or a working indoor bathroom, it may be completely out of the running for a conventional mortgage.

This is where bridging finance is proving to be a lifeline for first-time buyers across the country. Bridging loans differ from conventional home loans in that they can be used to purchase any type of property in any state of repair. They are also designed to be repaid as promptly as possible, usually within 1 to 18 months of being issued.

How bridging finance is helping first-time buyers

To understand how parents are using bridging finance to help their children buy their first homes, consider the following everyday example:

1. A property is set to go under the hammer at auction for considerably less than its true market value, as it requires considerable repairs and renovations to bring it up to a liveable standard.
2. The parents of the first-time buyer take out a bridging loan, using their own home as security for the facility. Bridging finance can be arranged within just a few working days, making it ideal for time-critical home purchases and investment opportunities.
3. A bridging loan is provided to cover the full costs of the property and those of the subsequent renovations. The property is purchased at the auction, payment is made in full, and the new owners begin the renovations.
4. Several months later, the property has been brought up to an excellent standard and is no longer classified as not mortgageable. The property is remortgaged onto a longer-term repayment facility (like a conventional mortgage), and the bridging loan is repaid.
5. In the meantime, the bridging loan will be charged at a rate as low as 0.5% per month, making it a hugely cost-effective product when repaid promptly.

What is important to note about this approach to purchasing a home are three things:

1. There is no need to come up with any kind of deposit whatsoever, as no deposit is payable on a bridging loan. This means first-time buyers (with the assistance of their parents) with limited on-hand savings need not be counted out of the running.
2. Bridging finance opens the door to the kinds of property purchases that would be out of the question with a conventional mortgage. Particularly when it comes to fixer-upper homes in questionable condition, traditional mortgages are typically unavailable.
3. Prompt repayment of a bridging loan can make the transaction in its entirety so much more affordable than arranging any conventional loan or mortgage. Monthly interest can be as low as 0.5%, and all other associated borrowing costs are negligible.

Given the estimated 200,000 properties in England that have stood unoccupied for six months or more, bargain hunters are advised to extend their search beyond the conventional property market.

Flexible finance for homeowners

Bridging finance is also a significantly more flexible and accommodating facility than any conventional mortgage. This can be particularly useful for applicants who are unable to provide formal proof of income or may have imperfections on their credit file.

Likewise, homeowners who are retired and would likely be turned down by high-street banks are also eligible for bridging finance.

Qualification criteria for bridging finance are not nearly as strict as conventional mortgage eligibility checks.

Bridging loans are issued on the basis of the following:

1. Ownership of assets of sufficient value to cover the costs of the loan, i.e., the property of the applicant.
2. Evidence of a workable exit strategy in reference to how and when the loan will be repaid by the borrower

A good credit score and evidence of a stable financial position will pave the way for a more competitive product. But even with poor credit, no proof of income, and a history of bankruptcy, it is still perfectly possible to qualify for bridging finance.

Consult with an experienced broker

If you are considering taking out a bridging loan to help a member of your family get on the property ladder, independent broker support is highly recommended.

Bridging finance is issued in a variety of forms with different purposes in mind, so it is important to know which type of bridging loan is right for you. Your broker will also be able to advise on the alternative financial products available if there is something that could prove more cost-effective than a bridging loan.

Your broker will negotiate on your behalf to ensure you get an unbeatable deal from a top-rated lender. Many of the UK’s leading bridging specialists offer their services exclusively by way of broker introductions and do not deal with customers directly.

For more information on any of the above or to discuss the potential benefits of bridging finance in more detail, contact a member of the team at UK Property Finance today.

As if the UK’s economic picture wasn’t already sketchy enough, its future outlook is even gloomier. The cost-of-living crisis is likely to worsen before it improves, with the Bank of England warning that inflation could go beyond 10% before the year is out.

But there is at least one positive in all the doom and gloom, at least from a bridging finance perspective; while all this is going on, the bridging loans sector is not only booming but is also offering its most competitive products in history to a growing audience of borrowers.

Application volumes and inquiry levels continue to hover at unprecedented highs as businesses and consumers alike take their businesses away from the major High Street banks. The more difficult and expensive it becomes to qualify for conventional loans or mortgages, the greater the tendency to seek unconventional alternative options.

One of which is bridging finance, which, due to its speed, flexibility, and accessibility, has skyrocketed in popularity over the past couple of years.

“This is great news, of course, particularly in the challenging economic environment,” said Vic Jannels, chief executive at The Association of Short-Term Lenders (ASTL).

“The latest ASTL lending data for the final three months of last year has revealed that completions were £1.2m for the quarter, which represents a record high and an increase of 19% on the previous quarter. This has led to another increase in loan books, which now stand at £5.08bn,” added Jannels.

Housing market competition: A key driver

Gross bridging loan completions were up a full 32% (reaching £485 million) during the first six months of last year, increasing further to an impressive 52% by November. This momentum has been largely maintained throughout 2022, resulting in average bridging loan interest rates hitting a new all-time low.

All of which is playing right into the hands of prospective homebuyers, many of whom are becoming increasingly disenchanted with what is available on the High Street, if not entirely out of the running for mortgage loans, due to increasingly strict lending criteria.

Demand for affordable homes continues to outstrip supply in almost every part of the UK. For buyers looking to avoid regrettable chain-break scenarios, bridging finance is offering a fast-access lifeline. Secured against their current home, a bridging loan can be used to buy their next home outright and allow plenty of time to sell their previous home for its full market value.

In addition, property developers are turning to bridging finance to fund purchases and renovations of vacant properties across the country. As most major banks continue to classify homes in questionable condition as ‘not mortgageable’, developers are finding themselves with little choice but to explore the alternative options available.

Matthew Arena, managing director at Brilliant Solutions, believes that the bridging finance sector is playing a major role in easing at least some of the pressure the housing sector is under.

“Bridging is performing well and has helped with several key housing issues,” he said.

“With property supply being so scarce, the ability of investors to develop or refurbish property and sell quickly is driving the sector,”

“Equally, the regulated element of the business is growing as the drive to move is as high as ever and suitable property is so difficult to find.”

“This is leading to more refurbishment and also a higher tendency to pay for bridging as a chain-break solution because there is a greater certainty of sale and a higher perceived loss if the opportunity falls through.”

Competitive finance with flexible terms

Unsurprisingly, demand for fast-access bridging finance has triggered a major spike in product availability from a growing network of specialist lenders. Once a fairly niche field, the bridging sector has become fiercely competitive.

Covering the needs of consumers and businesses alike, there are so many lenders now fighting to get new customers on board that average interest rates have been plummeting. It is now the norm to be offered a bridging loan with a monthly interest rate in the region of 0.5% or less, having once been reserved exclusively for prestige clients.

Meanwhile, associated borrowing costs (arrangement fees, transaction fees, completion fees, etc.) have likewise been dropping for some time, if not being removed entirely by many bridging specialists.

Alongside increasingly competitive deals, the flexibility of bridging finance is also proving a big draw for prospective borrowers. Employment status, proof of income, financial position, credit score, none of the usual obstacles apply to bridging finance applications.

Bridging loans are issued primarily based on two things: the provision of assets of value to cover the costs of the loan and evidence of a viable exit strategy for timely repayment. No jumping through hoops and no need to disclose your entire life story, as remains the case on the High Street.

All of which paints a picture of a booming bridging finance sector that’s becoming increasingly attractive to borrowers from all backgrounds. And with more economic doom and gloom on the horizon, it is a trend that looks set to continue for some time to come.