A number of building societies have launched what they call one-year mortgages. These are aimed at people who want to buy a house but have not yet sold their existing house. Normally, buyers use bridging loans to complete the purchase of property and then repay it when their existing house has been sold.
The mortgages are only being offered for buyers who want to break a housing chain. They will not replace bridging loans for property refurbishments, for development or for businesses wanting to raise short-term finance.
Benson Hersch, the CEO of the Association of Short Term Lenders (which represents the bridging industry), told BridgingAndCommercial.co.uk in April 2017 that building societies’ short-term mortgages have not had a significant effect on the bridging sector.
A major advantage of bridging loans is that they can be arranged much more quickly than alternative loans. Most large mortgage lenders have strict terms and conditions they need to follow when accessing a mortgage application. Bridging lenders are more flexible and are prepared to approve loans for more complex or nonstandard situations. They also offer niche loans, such as helping people purchase property at auctions and enabling developers to buy uninhabitable property that cannot be financed by a mortgage until refurbishment work has been completed.
The introduction of the one-year mortgage could benefit brokers who arrange both mortgages and bridging finance, as they can increase the range of products available to their clients.
One-year mortgages have a place in the lending market, but will not replace bridging loans, which are a separate entity.