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Bridging lenders contributing more than government’s Home Building Fund

The chancellor Philip Hammond announced that the Home Building Fund (HBF) will lend £1.5bn to finance the building of new homes, but this amount is dwarfed by the contribution of the bridging loan sector.

According to a November 2017 article, the Association of Short Term Lenders (ASTL) said that the total amount lent in bridging loans in 2017 up to the end of the third quarter was £3.5bn. As 85% of bridging lending is for property related transactions, it means bridging lenders have lent more to the housing market than the HBF.

Bridging loans have been used to renovate and purchase homes, as well as to build new ones. The government has pledged to assist small to medium developers build houses. Some of this help is in the form of loan guarantees.

The CEO of the Association of Short Term Lenders, Bernard Hersch said:

“Recent analysis undertaken by the ASTL of our membership shows that bridging loans are increasingly popular forms of finance for people looking to purchase their own homes. Such a trend demonstrates how alternative forms of finance are increasingly providing the solutions where government should be and could be bridging the gap.”

There is a shortage of affordable housing, and many high-street banks are not funding many housing developments, but bridging finance is available from alternative lenders for converting buildings into affordable housing, or building new affordable homes for first-time buyers.

The government wants to build an extra 300,000 homes a year – a figure that looks likely to require the help of bridging loans if it is to be realised.