Bridging Finance Activity Saw a Major 30% Spike During the Pandemic

Published: Aug 22, 2022

Bridging Loan Activity

Due in part to a distinct lack of options on the High Street, UK households turned to specialist bridging finance providers in record numbers during the pandemic. New research from Revolution Brokers suggests that since COVID-19 hit the UK, total bridging loan activity increased by as much as 30%.

At the beginning of 2020, bridging loan volumes totalled £122.9 million for the first quarter. This then declined significantly to £79.4 million during the second quarter, when the country was placed in near-total lockdown.

But as incentives were gradually introduced to breathe life back into the real estate sector; households across the country began setting their sights on bridging loans. The temporary stamp duty holiday proved an effective motivator, contributing to the £156.8 million in bridging loans issued in Q1 2022.

This represents an increase of more than 28% since the start of the pandemic.

What is Bridging Finance?

Bridging finance is a short-term, stop-gap solution for major outgoings and investments. It allows those with equity tied up in their homes (or other assets) to access significant sums of money within a short period of time.

One of the biggest benefits of bridging finance is how quickly the facility can be arranged. With all the necessary paperwork in place, a bridging loan of almost any size can be authorised and issued within a few working days. After which, interest accrues on a monthly basis, typically around 0.5% and the balance is repaid in full a few months later.

The speed and simplicity of bridging finance have made it a popular choice for homeowners looking to relocate, without having to sell their current homes beforehand. A bridging loan is taken out against their current property, the funds are used to buy their new home and the full balance is repaid at a later date when their previous property sells.

This not only enables home buyers to escape the traditional property chain, but also provides access to the potential discounts usually afforded exclusively to cash buyers. In addition, it means not having to rush through a property sale and giving your home all the time it needs to sell for its maximum market value.

Why Are Bridging Loan Volumes Increasing?

There are two main factors behind this significant increase in bridging loan volumes. The first of which is the flexibility and accessibility of bridging finance. Applications are simpler, qualification criteria are more relaxed and it is even possible to qualify for bridging finance with poor credit.

This in turn means that those who may struggle to qualify for a mortgage have every opportunity to qualify for a competitive bridging loan. The stricter the major High Street banks become with their own learning practices, the greater the appeal of the specialist bridging sector.

In addition, more people than ever before are exploring ways to escape the trappings of traditional property chains. Competition in the real estate sector is at an all-time high and cash buyers are enjoying a unique advantage.

“The government very intentionally made it hard for prospective buyers to resist getting involved with the property market during the pandemic,” said Almas Uddin, Founding Director of Revolution Brokers.

“Significant tax breaks caused many to think it was an opportunity too good to refuse and so market activity boomed. It’s natural for this to result in more and more people needing short-term loans in order to stay afloat when processes get delayed,”

“But interest rates are on the rise and don’t look like they’re going to slow down any time soon. This means the already high rates associated with bridging loans are going to become even more expensive. Therefore, it’s vital that when looking at bridging finance, you get a comprehensive view of what’s available to suit your individual situation.”

Meta: As competition in the real estate sector grows, more homebuyers than ever before are turning to the specialist bridging finance sector.