Bridging Rates Set to Rise, But It’s Not All Bad News
The popularity of bridging finance continues to grow, as private customers and commercial borrowers seek flexible alternatives to traditional High Street loans. Repaid promptly, a bridging loan can be one of the most cost-effective facilities on the market for short-term borrowing.
But even the dynamic specialist lending sector in the UK is not immune to the economic pressures being felt by each and every resident and business right now. Consequently, analysts are now predicting an inevitable rise in bridging loan rates before the end of the year.
Even so, it is certainly not all bad news for prospective borrowers.
Record-Low Rates in Q4
The latest figures suggest that average bridging rates hit a record low of 0.71% per month in the first quarter of the year, down from 0.77% in Q4 2021. Bridging finance is routinely issued at rates as low as 0.5% per month – one of many factors driving the sector’s skyrocketing popularity.
Bridging finance rates have been creeping ever lower due to the growing competition in the short-term lending landscape. More specialist lenders than ever before have entered the bridging arena, prompting something of a bidding war between the market’s key players.
There are even some mainstream banks that have begun introducing their own takes on short-term loans; though in most cases few are as flexible and affordable as those from dedicated bridging loan specialists.
The popularity of bridging finance is also attributed to its versatility. Unlike most conventional High Street loans, a bridging loan can be used for almost any legal purpose with no restrictions. It is also possible to secure bridging finance against almost any type of property, irrespective of its age and condition.
All of which is expected to result in an ongoing influx of activity for the bridging sector going forward. Even with what seems to be an inevitable interest rate hike on the horizon, it is unlikely to remove the shine from the booming bridging sector.
Inevitable Interest Rate Hikes
The fact that bridging loan rates have been hovering around record-low for such a long time is precisely why a gradual increase has been predicted by most economists. Coupled with the fact that Bank of England base rates are on the up and the UK is in the midst of an almost unprecedented economic crisis, bridging loan specialists will have little choice but to respond accordingly.
The extraordinary affordability of bridging finance as it stands today is entirely unsustainable. As is the case with the mainstream market, bridging specialists need to pass the costs of running their businesses onto their customers. The more expensive it becomes to run a business, the greater the inevitability of higher costs.
Still, it is not all doom and gloom for those interested in taking out a bridging loan in the near future.
For one thing, any increases that do creep into the mix will almost certainly be incremental and modest in nature. In addition, it is still possible to pick up a bridging loan right now with a record-low monthly interest rate.
Many (if not most) leading bridging finance specialists are still advertising short-term loans with monthly interest rates as low as 0.5%. This means that for the time being at least, there is every opportunity to take full advantage of what could prove to be a once-in-a-lifetime low rate of interest.
Competition remains ferocious among providers, prompting many to sweeten their deals like never before to get more borrowers on board. How inevitable interest rate hikes affect this remains to be seen, but now really could be the time to secure an unbeatable deal while the opportunity remains.