Interesting Facts About Bridging Loans

Interesting Facts about Bridging Loans

Authored by CraigUpton
Posted: Thursday, December 9, 2021 - 15:03

With the sector having achieved its strongest quarterly performance since 2018, there is no better time to take a look at a few interesting facts about bridging finance.

However well you think you know bridging loans, you may find at least a couple of the following facts and figures enlightening: 

1.  The sector’s total value now exceeds £7 billion

What was once a fairly niche sector has evolved into a real force to be reckoned with. Estimates vary, but the latest figures suggest that the bridging finance sector is now worth more than £7 billion per year.

2.  Unregulated bridging loans continue to dominate

A point that highlights the importance of applying with the help and support of an established broker; somewhere in the region of 60% of bridging loans issued are unregulated, meaning they are not overseen or protected by the Financial Conduct Authority.

3.  Bridging finance is no new concept

While the sector may have only begun hitting its stride as of late, the concept actually dates all the way back to the 1960s. Back then, bridging finance existed in the form of scarcely available specialist mortgage products, issued over the short-term and exclusively for property purchases.

4.  The credit crunch of 2008 catalysed the sector

Much of the sector’s recent performance has been credited to a major shift in consumer and business borrowing behaviour following the 2008 recession. With next to no support available from major banks and High Street providers, borrowers took their business to the UK’s fledgling specialist lending network.

5.  Bridging loans terms were once restricted to nine months

The maximum loan term available for a bridging loan was just nine months. Over the years, lenders began demonstrating greater flexibility for the benefit of their borrowers. Today, bridging loan terms can be as short as a few weeks or as long as two years.

6.  A bridging loan can be used for any legal purpose

Bridging finance is primarily associated with property purchases and similar investments. While this is the most common application for bridging finance, a bridging loan can in fact be used for any legal purpose whatsoever. All of which makes it a far more flexible facility than almost any comparable loan.

7. ‘Bridging finance’ is a relatively new term

Specialist short-term loans have been around for some time, but prior to 2008 were not referred to as bridging loans. They were simply called ‘short-term loans’ or ‘short-term finance’ - the bridging finance moniker only coming into play after 2008.

8.  It also goes by several other names

You may occasionally hear a borrower or lender mentioning swing loans, gap financing or interim financing. All of which are alternative names for bridging loans, which over the years many lenders have attempted to re-brand for their own benefit.

For more information on any of the above or to discuss the potential benefits of bridging finance in more detail, call anytime for an obligation-free consultation.

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