For the most part, the development of the bridging sector reflects the growing challenge of securing financial support on the UK High Street. Increasingly, consumers and commercial borrowers are finding it difficult to find the products and services they need in the timeframe required.
Delays in the processing of loan applications has resulted in clients looking for alternatives to conventional banks and lenders. With mortgage applications now regularly taking more than three months to process, applicants are setting their sights on faster and more convenient options elsewhere.
Speed and Efficiency
The biggest and most important difference between bridging finance and most conventional financial products is the speed at which the capital required can be accessed.
On the High Street, application processing times are usually slower. This in turn means that mortgages, business property loans and commercial finance can take weeks or even months to arrange.
With bridging finance, it is possible for almost any sum of money for any legal purpose to be made available within a matter of days. Even in the case of high-value loans for complex projects, it is rare for bridging finance to take more than a few weeks to be made available, making bridging loans ideal for time-critical purchase and investment opportunities.
Bucking the Short-Term Borrowing Trend
Short-term loans have always been associated with disproportionately high costs, on the contrary the bridging market has the potential to be highly cost-effective. Unlike conventional loans and mortgages, bridging loans are short-term loans designed to be repaid as quickly as possible, often within the space of just a few months.
When a bridging loan is repaid on time or early, within a short period of time, it can be considerably more affordable than any comparable mortgage property loan.
The Early 2021 Property Purchase Boom
Having now been extended until the end of September, the chancellor’s initial stamp duty holiday deadline of March 31 triggered a boom in real estate market activity earlier this year. With mortgage application processing times exceeding three months with many conventional lenders, would-be buyers found themselves with little choice but to consider the alternative options available.
Typically sourced via independent brokers, bridging loans provided qualifying applicants with a perfect solution. Fast-access funds to buy homes and make major savings before the stamp duty holiday deadline, after which the capital is repaid in full when the sale closes on their current home.
This in particular demonstrated the potential value and versatility of bridging finance for the everyday borrower, not just the established investor or commercial customer. As demand grows for flexible, affordable, and comparatively simple financial products, the bridging finance sector in the UK is predicted to continue going from strength to strength.