Bridging loans are useful but not necessarily long-term
Published On 15 October 2007
Bridging loans are one of the best courses of action available to home buyers stuck needing money for mortgages on their new property and other financial obligations while their old house sells.That is according to the Council of Mortgage Lenders (CML), the trade association for the mortgage industry, which represents 98 per cent of all residential lenders.
However, a spokesperson for the association warned that bridging loans are not long term solutions, packaged as they are with high entry and exit fees and rates of interest.
"Bridging finance is the main and obvious route where there is a mismatch between the purchase of a property and the sale of a former property, and there is a need to bridge the gap," she said.
"Because bridging is an expensive form of property finance, it is ideally the case that the borrower and the finance company should have a clear view as to what the exit strategy from that bridging finance deal is. It shouldn't necessarily be seen as a long term solution to any property-related transaction."
The CML is currently assessing whether there is a need for a trade body in the bridging loans sector and if a code of conduct should be established.
