Some lenders have reduced their interest rates on short-term and bridging loans. This is mainly because of increased competition between lenders. In the past few months, there have been many new financial organisations entering the short-term loan market. High street banks also want to increase their share of the bridging loan market.
Rates of 0.75% a month are possible for loans to purchase
commercial property, and these are offered with no exit fees for early repayment. Around two to three years ago, the lowest interest rates were around 1.25% a month.
There has been an increase over the last few years in the number of uses for bridging loans. Though the majority of loans are for property related deals, purchasing or developing property, businesses use bridging finance for temporary cash flow problems, to pay unexpected tax bills and to purchase stock or equipment. Low rates are available for all types of bridging loans.
If the Bank of England raises its interest rate, bridging loans could increase, but rates should remain low, especially those offered by small specialist lenders.
The interest rate charged on bridging finance is not fixed. Each case is assessed individually for risk. If a lender decides that the loan is a medium to high risk, then the rate charged will be higher than the lowest rates of 0.75% a month available to low risk loans.
An experienced broker has access to the whole of the market and can find the lowest rates for borrowers.