Traditionally bridging finance is best defined as a short-term lending, often over a period of between four weeks and eighteen months but this can extend longer with the consent of the lender and sufficient documented reason. This type of lending is commonly referred to as a bridging loan in the United Kingdom, it is also called a caveat loan and swing loan in other countries that offer the same type of financing. While the headline interest rate on bridging finance can seem fairly high, compared to traditional loans, this does not give a fair reflection of the bridging loans value and popularity and the uses in the property market sector. UK BRIDGING FINANCE FACTS Many reports into the UK bridging finance market show some very interesting numbers on this often ignored area of debt finance. Some of the basic facts include:- • Average loan to value 45% • Average term of bridging finance 11 months • Average monthly interest rate 0.84% • A first charge was in place on 83% of bridging loans • A second charge was in place on 17% of bridging loans Many people will be surprised to see current interest rates charged by bridging finance companies compared to those of years gone by and how competitive the rates are. The most popular reasons for securing bridging finance are:- • Property refurbishment 27% • Mortgage delays 25% • Re-bridging loan 13% • Business purposes 11% • Auction purchases 9% • Other 15% While it is fair to say that the majority of bridging finance relates in some shape or form to property transactions, both commercial and residential, there are other areas in which it is useful. While these industry figures make for interesting reading, the situation for high net worth individuals/investors can vary markedly. Platinum Global Bridging
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