Bridging is one of those subjects that still generates a sharp intake of breath from most people. However, it’s one of the financing strategies that can create considerable profit when
used intelligently.
Bridging has always been a bit more expensive than mainstream buy-to-let (BTL) mortgages but has many advantages too. It lets the investor purchase properties that are unmortgageable but that might have massive potential to uplift the value. It’s a good strategy for people who don’t necessarily ‘qualify’ for a BTL mortgage too, to get the project started.
Bridging loans have not fallen off in the same way as BTL lending (currently down 20%+). For brokers who only do residential mortgages it can be a worrying time as a large chunk of their business comes from first time buyers and there are fewer of them around as the current interest rates on offer simply eliminate them from an affordability point-of-view. For property investors, BTL rates are also now so high and lenders so conservative that they are also struggling to meet the requirements.
But now interest rates for fixed rate BTL mortgages have risen and, at the time of writing are typically running at 6-8%, having risen from under 2%. However, bridging rates haven’t escalated in the same way, so they have become much more ‘affordable’.
Of course, it depends on where your bridging comes from. Different types of bridging lenders offer different rates. For instance, the biggest commercial lender’s rates have risen by between 0.05% and 0.1%, depending on the product.
Bridging that is funded by the big corporates and US banks has only risen by 0.1%. Some bridging lenders are even offering tracker rates, although, as they’re funded through the banking
system, the Bank of England interest rates do have an effect.
A broker’s perspective
As a broker, via our Positive Property Finance brokerage, the business has changed slightly, but not as much as the main mortgage market. We’re still getting plenty of enquiries, perhaps fewer that actually come to fruition, but it’s not a big drop off.
