Bridging, in its ‘purest’ form, was originally marketed as a chain-break solution.  If you sold your home and bought a new one, only to find that completion of the sale of the previous one took longer than anticipated, a bridging loan came to the rescue.  Post 2008, the unwillingness of mainstream lenders to ‘bridge the gap’ created an opportunity for lenders who looked beyond traditional lines and were not scared of their own shadows.


Delays in selling homes, whether downsizing or upsizing, have been recognised in the latest budget.  The additional three per cent stamp duty land tax (SDLT) on second homes can now be recouped up to 36 months (rather than the originally proposed 18 months), after the purchase of a new residence.


However, it would be wrong to imagine that chain-breaking is the main purpose of bridging loans. Indeed, financing of owner-occupied homes amounts to less than thirty per cent of bridging. Today, many bridging firms call themselves ‘short term lenders’.  They have even expanded into medium term lending.  The common denominator is that loans are primarily secured by property. Some lenders now even consider a blend of securities, including high-end jewellery, vehicles and works of art.


The purposes of borrowing are many and varied.  These include short-term cash flow requirements for businesses such as building up stocks, investment opportunities that require immediate cash, or even the wish of people to go on the holiday of a lifetime or buy a new car. Often, early redemption of investments incur penalties or property assets may take time to sell, either because people may wish to maximise prices or are waiting for probate to be completed.


As long as the exit is clear and underwriting is professionally done, bridging finance is now an established part of the finance market.  Perhaps one day it will be regarded as mainstream, rather than alternative lending.


Benson Hersch, CEO of the ASTL


A version of this article was published by Mortgage Strategy in March 2016