Bridging finance is an ideal solution for raising capital quickly for a property purchase. A bridging loan (or bridge loan) is generally used by property developers, although individuals might consider one if a mortgage is not an option.
As the buy-to-let property market has grown, so too has the number of specialist bridging lenders. However, lenders may prefer to borrow from a well-known bank. A number of high street banks offer bridging loans*, including:
- Bank of Scotland
To apply for a high street bank bridging loan, you should consult a specialist loan broker, as banks are unlikely to lend directly to individuals.
A bridge loan is a secured loan over a short period, usually no more than 12 months. As the name suggests, it is to bridge a financial gap until a property purchase goes through or a property development project comes to fruition. Due to the short-term nature of the loan and fluctuations in the property market, traditional high street banks can sometimes be reluctant to offer bridging finance. And, when they do, they don’t tend to shout about it.
Read on to find out how to secure bridge loans from banks. For a free bridging loan consultation, please get in touch for FREE advice from a reputable bridging loan expert.
*correct as of November 2022. This is not an exhaustive list, other high street banks may also offer bridging finance.
Are all high street banks bridging loan providers?
Many banks stopped offering bridging loans following the global financial crisis of 2008, as demand decreased significantly and the risk became greater.
Today, many have reintroduced bridging loans but don’t necessarily advertise them. This is probably because of the comparative complex nature of bridge loans to other forms of finance and the higher perceived risk.
Therefore, it is necessary to apply for a bank bridging loan through a loan broker, to ensure you access the full range of deals from high street banks.
To get in touch with an experienced bridging loan expert, please fill out our contact form.
What types of bridging finance can banks offer?
As with mortgages, lenders offer several different types of bridging loan, depending on your requirements and financial situation.
First charge bridging loans
Bridging loans are secured loans, meaning that the lender must put up an asset, usually property, as security.
The lender can then use the asset as payment in the event the borrower defaults on the loan. If there are no other loans against that asset, it is classed as a first charge loan.
Second charge bridging loans
If the borrower has an existing mortgage or loan secured against the asset from another lender, then it is considered a second charge loan.
Simply, the first charge lender has priority over the second charge lender to use the asset as payment, should the borrower become unable to keep up the loan repayments. Due to the greater risk involved, a second charge loan is likely to incur a higher interest rate than a first charge loan.
Third charge loans do exist, but are increasingly rare, very difficult to secure and are subject to even higher interest rates. If you are considering a third charge loan you will almost certainly require the assistance of a knowledgeable loan broker.
Fixed or variable interest
As with mortgages, you can opt for a variable or fixed rate of interest when taking out a bridge loan. A variable rate will change in line with the Bank of England base rate.
Open bridging loans/closed bridging loans
An open bridge loan allows the borrower more flexibility as there is no fixed repayment date, although it’s usually capped at 12 months.
Conversely, closed bridging loans have a fixed date set for repayment.
How much does a high street bank bridging loan cost?
Bridging finance interest rates fluctuate depending on the Bank of England base rate. High street banks typically charge a 0.4% – 1% interest rate per month on bridge loans.
For example, the repayment on a bridging loan of £500,000 over 12 months at a 0.5% interest rate would be £530,000.
Why should I get a bridging loan from a bank?
Due to the growing demand for bridging loans, a lot of specialist lenders have sprung up in recent years offering competitive interest rates and quick access to finance.
As with all property finance, it pays to shop around. To save time and hassle, and to find the best deal available, it is advisable to consult a loan broker who has access to the whole of the market.
While some property developers may prefer to borrow money from an established, mainstream lender, banks can be reluctant to issue bridge loans, as discussed above.
The short-term nature of bridge loans, the fast-moving property market and the sheer number of variables involved in property development tend to make them hesitant, especially when financial times are uncertain.
So while high street banks do currently offer bridging loans, they are almost impossible to research and apply for without the help of a broker.
Get the best bank bridging loan rates from Bridging Options
A lot of high street banks have subsidiaries that handle bridging loans separately and are not accessible by the public.
Therefore, to successfully apply for a bridge loan from a bank, it’s necessary to work with a loan broker.
At Bridging Options, we can help you to access the best deals on bridging finance on both residential and commercial property, from well-known banks and specialist lenders.
Our experienced team will use their common sense approach to help you ‘bridge the financial gap’ and achieve your property ambitions.
Complete our quick enquiry form or call us, and a bridging loan specialist will be in touch to offer FREE advice.
You don’t need to be a customer of a bank to apply for bridging finance, but given how difficult it can be to source a bridging loan from banks, it may offer you a foot in the door.
As with any form of finance, borrowing from a large, established bank is generally less risky. However, high street banks are less likely to offer bridging loans in times of financial uncertainty and have been known to withdraw them altogether.
It is very hard to say who offers a more competitive rate as the market is ever-moving and the interest rate charged on a bridging loan is determined by many factors. This includes the loan amount, the loan-to-value ratio (LTV), the collateral offered as security, income, credit history and the loan term. To be sure of finding the best deals, it pays to use a loan broker.
Unlike mortgages, bridging loans are unregulated, meaning they are not regulated by the Financial Conduct Authority. However, if a lender requires the borrower’s private home as collateral for the loan, they have to acquire FCA certification and the loan is then considered regulated.
See our recent post on the differences between bridging loans vs mortgages here.