Bridging loans

Mortgage brokers report that affluent borrowers are increasingly taking out bridging loans to purchase new homes.

At the moment, it is not so easy to sell property because dropping house prices and uncertainty of the economy have brought about a decline in demand.

Consequently, those people who want to move homes have to resort to bridging loans, which give them an opportunity to acquire a new home even though they haven’t yet secured money from the sale proceeds on their old property. Typically, bridging loans should be paid off in 6-12 months.

Simon Gammon, of Knight Frank Finance, confirmed that there was an increase in the number of applications for bridging finance in recent months. In addition, other mortgage brokers said that private banks were glad to structure bridging loans at the same rates as standard residential loans – about 2.5-3% for a SVR without any penalties. This can save a great deal of money for the borrowers since traditional bridging lenders don’t offer such attractive interest rates and usually have arrangement fees of 1-2%.

Although overall demand for houses has declined, housing experts claim that best properties in good locations are still being successfully sold instantly and usually above asking price.
 


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