The changing shape of bridging loans interest rates
For most standard mortgages there is a fixed interest rate available for borrowers, but this is not the case for bridging loans.
When applying for a mortgage, borrowers can choose a fixed interest rate that will apply for a number of years. This will be based on both the value of the loan and the loan-to-value (or how much deposit they will need).
Bridging loans for property deals are not as straightforward. Some lenders publish a product sheet that offers a rough guide to their loan types and interest rates, but these may vary according to a loan‘s risk assessment.
A new bridging lender, Octane Capital, has decided not to publish a product sheet. Instead, it assesses every loan application on an individual basis, creating a risk profile that determines the interest rate charged. The firm’s chief executive, Jonathan Samuels explained the approach in an FTadviser.com article from May 2017, saying:
“Bridging has changed significantly since I first entered the market back in 2009, with ever lower LTV-based pricing the dominant narrative. But for us, this is misplaced.
“Rather than be constrained by a restrictive price to LTV matrix, we’ve decided to price for risk, which means no set product sheet.”
Bridging loans can be used for a number of purposes, and can be complex. While large high street use fixed rules when reviewing loan applications, specialist bridging finance lenders take a more flexible approach. A bridging finance broker can help borrowers find the best bridging deals.