How Are Bridging Loans Being Used in the Current Market?

A recent spike in bridging finance activity has seen loan volumes once again come close to pre-pandemic peaks. Even in times of economic uncertainty, bridging finance continues to serve as an affordable and attractive alternative to conventional high-street loans.

Equally, the growing availability of bridging loans is broadening the appeal of responsible short-term borrowing to a more diverse audience than ever before. There are more independent specialists offering bridging loans in the UK than ever before, spurring the kind of competition that has brought average monthly interest rates to all-time lows.

But what are the specific applications that bridging loans are currently being used for? What are the most popular uses for bridging finance in the UK as of Q4 2022?

Investment property purchases

For some time now, the most common application for bridging finance has been purchasing investment properties. Ferocious competition in the UK housing market is prompting more investors than ever before to seek fast-access funding for time-critical property purchase opportunities. Bridging finance provides new and established investors alike with the opportunity to beat competing bidders to the punch and to purchase properties that would not be considered eligible for a conventional mortgage.

Chain break

The latest figures from Bridging Trends suggest that the second most common application for bridging finance as of right now is funding chain breaks. This is where homeowners looking to relocate effectively use bridging finance to become cash buyers. They borrow against the equity they have tied up in their current home; the funds needed to purchase their next property are released within a few days, and the transaction is wrapped up as promptly as possible. Property chains have become increasingly complex and fragile as of late as competing bidders go to extremes to beat their rivals to the punch.

Light and heavy refurbishments

Another popular use for bridging finance is funding light and heavy property refurbishments. Homeowners, for example, often take out a bridging loan to cover significant improvements to their properties before listing them on the market for their maximum value. Elsewhere, investors looking to flip homes for profit routinely use bridging finance to fund their projects before selling their properties for the biggest possible profit. As bridging finance is designed to be repaid within a few months, it is ideal for short-term undertakings like these.

Auction purchases

Purchasing properties at auction can pave the way for significant savings. It is not uncommon for homes and business properties to sell at auction for less than £50,000, making them ideal as ‘fixer-upper’ projects. But as the full balance on auction property purchases needs to be paid within 28 days, no conventional mortgage or property loan is viable. Bridging finance, which can be organised and accessed within a few working days, has become the go-to for many thousands of people looking to pick up bargain properties at auction.

Business purposes

Business owners looking to cover time-critical gaps in their finances have been turning to bridge finance specialists in record numbers. Bridging finance is uniquely flexible and accessible, with no specific limitations on how the funds can be allocated. From purchasing stock to upgrading business equipment to covering staff wages and tax bills, bridging finance has a broad range of applications for business owners and SMEs. It can also be secured against a wide variety of assets of value, making it more accessible than many comparable types of secured business loans.