As many mainstream banks restrict property loans, many investors are turning to bridging finance solutions.
As a result of the 2008 financial crisis, the banks have limited their exposure to property lending. European Union regulations have also placed lending limits on
property loans. Brexit has created further uncertainty for property investors who are not sure about the availability of loans during the next few years. Banks are being cautious about lending in case there is a downturn in the economy following Brexit. Many European banks are considering moving out of the UK because of Brexit.
To fulfill the demand for loans, alternative and specialist lenders offer bridging finance as a short-term lending solution. Short time finance is particularly useful for refurbishment projects where construction work can increase the value of a property ready for sale at a profit. Interest rates are low, with terms of around 0.49% a month available.
The market for bridging loans is competitive and this has kept fees and interest rates low. Another advantage of bridging loans is that, compared to other loans, they can be arranged quickly to meet property purchase deadlines. This is especially useful for purchasing properties bought at auctions, as purchases must be paid for within 28 days after a winning bid.
If the property market decreases some alternative bridging lenders could pull out of the market, but many will remain. A bridging finance broker will continue to be able to find bridging loans suitable for property investors.