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11/23/2016 12:00:00 AM   0 Comments   bridging loans, buy to let

As rates continue to fall following the Brexit vote, borrowers are increasingly opting for bridging finance.

Demand for bridging finance has grown rapidly in recent years and shows little sign of slowing down - even in the wake of the EU referendum. Weve tracked the market with our Bridging Index for four years now and in that time gross annual lending has gone from £1.6bn to £4.4bn.

Part of that growth is down to the market. Since 2012, investment activity has picked up as small investors and developers have regained their confidence after the last recession.

But it doesnt tell the whole story. Mainstream lenders have become slower and more circumspect since the financial crisis, so for borrowers who need to complete quickly or who are doing anything out of the ordinary, bridging has become increasingly attractive.

At the same time, our industry has also upped its game and is now far more professional, tightly regulated and competitive than it was a decade ago.

Rates have come down and in many cases the cost of bridging finance is now on a par with the cost of mainstream finance. For example, we charge as little as 0.75% a month, so for a borrower looking at refurbishing and selling a property in a matter of months the all-in cost of finance is comparable to the mainstream, especially when you consider the early repayment charges that some banks will impose.

Crucially, with us, there is the added benefit of speed - we can offer terms the same day and complete in 48 hours. Moreover, borrowers are able to talk directly to underwriters and arrange deals that are far more flexible and bespoke than anything available from the high-street lenders.

In recent times, finance from traditional sources has become even harder to secure. Traditional high street banks reduced their lending by 12.8% year-on-year to July. By contrast, the month after the EU referendum, our index recorded a 3.3% increase in bridging lending compared with June, demonstrating just how quickly we and our borrowers got back to business after the vote.

In July, gross annual lending also hit a record high of £4.4bn. This year, we experienced a noticeable uptick in activity ahead of the stamp duty changes in April. Bridging lenders were able to step in to provide investors with financing quickly to allow them to complete ahead of the deadline and save thousands of pounds in the process.

There will doubtless be many other occasions when bridging lenders can help borrowers facing changes to government policy or taxation. In the meantime, day-to-day there are a broad range of scenarios in which short-term financing comes into play.

Stephen Wasserman
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