How does the interest rate rise affect bridging finance?
The Bank of England raised its base interest rate from 0.25% to 0.5% on November 2, but reactions gauged in a BridgingAndCommercial.co.uk article from this month suggest that this should not have a large impact on bridging finance.
First-time buyers usually do not have a lot of spare money. Mortgages often get delayed, which creates a high demand for bridging loans to complete house purchases before mortgage funds are available. If first-time buyers need a bridging loan to quickly complete a house purchase, this will add more financial pressure.
For most borrowers, the short-term impact on bridging finance will be limited. Interest rates are at low levels already and any increases are unlikely to be large, especially if lenders’ limit rate rises in line with the Bank of England rise. It is possible that some privately funded bridging lenders may not put up their rates.
It is expected that bridging loans will continue to have no early repayment charges.
The rise in Bank of England interest rates was designed to curb inflation, but if it continues to rise, some financial analysts believe that it could be the first of a number of small increases over the next year or two. Businesses that regularly use bridging finance could take this into account when creating forecasts based on the use of bridging loans.
Bridging finance brokers will keep themselves up to date with any bridging finance rate rises and will continue to advise their clients on the most suitable bridging finance deals.