Wealthy Britons offering bridging loans to property professionals

Wealthy Britons offering bridging loans to property professionals



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As lenders remain cautious amongst tough economic conditions, high net worth individuals have seen something of a gap in the market and have begun to provide bridging finance and mezzanine finance for property developers. 

According to a report on Wealth Bulletin from the mortgage lending arm of estate agent Knight Frank, a number of well-to-do Britons are lending between £500,000 and £2 million to property developers looking to get projects off the ground.
 
As the loans are on a short term basis, or between 1 and 2 years, returns are made quickly, with individuals seeking an annual return on their capital of up to 30%.
 
The estate agent also disclosed that investors erring on the cautious side were taking advantage of the rising number of property funds, which give mezzanine finance for developers.
 
 
Simon Gammon, managing partner at Knight Frank Finance, said that the changes have arisen from mezzanine finance all but disappearing from high street banks during the recession.
 
He added: “Over the last two years development and finance have become dirty words. Banks have limited, if no appetite for mezzanine funding over and above senior debt.”
 
Property developers were once able to turn to HBOS and most of the Irish banks for this kind of funding; however, since the onset of the crisis, alternative methods of securing finance have needed to be sought. Mr Gammon said: “This is the first time we have seen this happening on a large scale. It can be a great investment for cash-rich individuals looking for a swift return which exceeds the UK base rate.”

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