.Sonny Gosai, senior sales development manager

Helping brokers understand regulated bridging

The regulated bridging market has continued to extend its market share in the last few years, as economic uncertainty fuelled by the cost-of-living crisis and higher interest rates saw demand for this type of borrowing grow.

Sales of regulated bridging loans accounted for 46.3% in 2023, up from 44% in 2022 and 40.8% in 2021, according to Bridging Trends, with data from Knowledge Bank also revealing that regulated bridging was the top search among bridging brokers, as the benefits of using the product to achieve property goals continues to increase.

The growth of the regulated bridging sector is great news for the specialist lending market and clearly demonstrates the increased awareness among brokers and borrowers for the use of bridging finance as a useful financial tool.

Historically, the regulated bridging loan sector has remained in the shadows of the more popular unregulated bridging market, which is well-utilised by landlords, property developers and investors looking for short-term finance to fund housing projects.

However, the economic challenges of recent years coupled with affordability constraints and a sluggish housing market have led to an uptick in demand for regulated bridging finance among residential borrowers, many of whom have taken out the product to help them secure a property before their current one has sold.

Regulated bridging finance works by enabling homeowners to quickly raise the funds needed to purchase a new property outright with cash before repaying the loan with the money they receive when the sale of their existing property goes through.

By taking out a bridging loan, the client effectively becomes a cash buyer which can often help them circumvent the problems commonly associated with buying a home, such as selling at a loss to secure a quick sale, losing out on the property of their dreams due to delays in the buying process or experiencing a chain collapse when a buyer pulls out.

In each of these cases, a regulated bridging loan can provide a short-term financing solution to help them safeguard a property purchase and prevent them from missing out on the home of their dreams.

This can be particularly useful in situations where there is a threat of a chain collapsing and therefore wiping out months of paperwork and thousands of pounds in fees and associated costs. It also means that if your client’s buyer does pull out, they can still go ahead with their own house purchase and avoid losing out on their dream property.

One of the many misconceptions about taking out a regulated bridging loan is that it is far more expensive that an ordinary loan or mortgage. While addressing client concerns is always crucial, it is important to point out that cash buyers are extremely attractive in the housing market and can often negotiate a better price as a result. Similarly, the cost to bridge the gap using unregulated bridging finance can be offset by the higher final sale price of the existing property.

Another misconception among borrowers is that bridging loans are only suitable for properties with a significantly higher purchase price, but this is simply not true. The loans can be used across the board and the recent lift in demand for the product among residential borrowers shows that they are increasingly being taken out to cover the cost of average priced transactions on standard run-of-the-mill properties.

All borrowers taking out a bridging loan will need to ensure they have an exit strategy and a means to repay the loan, which in most cases, will probably be the sale of their existing property. This whole process can be a daunting task for those brokers unfamiliar with this area of the mortgage market, particularly when they don’t know where to start, which is where enlisting the help of a specialist master broker and packager such as Norton Broker (NBS) services can help.

With over 50 years’ experience in the specialist lending market, NBS has the expertise, knowledge and lender relationships needed to ensure clients get the advice and outcome they need to achieve their property goals. This means brokers can focus on helping those clients with more simple and straightforward mortgage applications while we help them address the specialist lending cases of their more complex borrowing clients.


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