As the UK property and finance sectors proceed to evolve, bridging loans are rising as a mainstream instrument slightly than a last-resort answer.
Once the protect of builders and high-net-worth people, these short-term funding choices are gaining broader attraction amongst property buyers, landlords and owners.
With the market forecast to develop considerably, the future of bridging loans seems each promising and dynamic.
As the proprietor of a enterprise that processes 1000’s of enquiries every year, I can see the expansion. Bridging loans have been perceived to be primarily used to ‘bridge the hole’ between a property buy and the provision of longer-term finance. They have proved particularly helpful in time-sensitive eventualities corresponding to chain breaks, public sale purchases or property refurbishments requiring fast capital.
These lending choices are gaining broader attraction
In latest years, demand has been pushed by more and more sluggish mainstream mortgage processing. Tighter lending standards and affordability guidelines have made conventional routes much less viable for these with advanced or time-critical instances. In distinction, bridging provides the velocity and adaptability many debtors now require.
According to knowledge from Bridging Trends and the Association of Short Term Lenders, the market stands at about £8.5bn yearly. Analysts venture this may develop to £11bn–£12bn by 2027, equating to a compound annual progress price of 8%–10% over the following three years.
This progress will seemingly be underpinned by continued demand from skilled buyers, rising consciousness amongst particular person debtors and schooling on the product’s advantages to brokers — one thing that our group does day-after-day.
Investor demand
Property buyers and builders stay a driving power behind this market. Many use bridging loans to accumulate and refurbish properties earlier than refinancing with a conventional buy-to-let or business mortgage.
In the context of permitted growth rights and small-scale residential conversions, bridging loans have change into indispensable.
The rise of digital platforms and peer-to-peer funding fashions is opening up bridging finance to a broader base of buyers
Landlords are additionally more and more reliant on bridging finance to take care of competitiveness. With rising tax liabilities and tighter power effectivity laws affecting rental inventory, short-term finance is commonly used to improve properties rapidly to fulfill minimal power efficiency certificates requirements.
Despite sustained demand, the fee of bridging stays a key issue. In 2009, once I entered this market, the headline price was 1.25% per thirty days. Interest charges right this moment sometimes vary from 0.65% to 1.25% per thirty days, relying on the lender, property kind and loan-to-value ratio. The blended price can be round 0.8% per thirty days.
As the Bank of England continues to battle inflation, base charges stay elevated. This atmosphere locations stress on lenders’ funding prices, however a gradual discount in charges — probably by late 2025 — might immediate a modest easing in bridging mortgage pricing.
In the context of permitted growth rights and small-scale residential conversions, bridging loans have change into indispensable
While nonetheless costlier than mainstream mortgages, bridging loans supply the benefit of velocity and fewer bureaucratic hurdles and, if used appropriately, may be aggressive when you think about that some lenders don’t cost exit charges.
We have labored with many professionals preferring to safe funding for one-to-three-month refurb tasks to extend the property worth, or maintain it by changing from bridging to a buy-to-let.
FCA scrutiny
The Financial Conduct Authority has taken an more and more energetic curiosity within the bridging sector, notably the place client debtors are involved. While most bridging loans are unregulated — used for enterprise functions or funding properties — a rising quantity are falling beneath the regulated class, particularly these linked to owner-occupied residences.
Lenders are responding by enhancing transparency and due diligence. Responsible underwriting, validated exit methods and clearly disclosed phrases are customary follow amongst respected suppliers. This shift not solely protects debtors however reinforces confidence within the sector, which I’ve championed for years.
Bridging loans are rising as a mainstream instrument slightly than a last-resort answer
Digital transformation is accelerating throughout the sector. Automation, Open Banking and prompt property valuations are decreasing processing occasions dramatically. Some lenders supply approvals inside hours, enabling debtors to behave swiftly in aggressive markets. CRM expertise suppliers are additionally investing on this space.
The rise of digital platforms and peer-to-peer funding fashions is opening up bridging finance to a broader base of buyers. These platforms enable fractional participation in loans, providing new avenues for capital deployment within the short-term lending area.
As bridging finance continues to develop in scale and class, it’s quickly turning into a cornerstone of the UK’s lending infrastructure.
Paul McGonigle is chief govt of Positive Lending
This article featured within the June 2025 version of Mortgage Strategy.
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