Bridging loans 'should only be considered in exceptional circumstance'
Published On 31 January 2008
While bridging loans do carry very high rates of interest they can be appropriate in certain rare circumstances, an industry expert has said.Homebuyers sometimes need a bridging loan to cover the financial gap between purchasing a new property and selling an existing one.
However, James Molloy, product manager for AA Legal Services, said that people should only consider the loan - which often has a very high rate of interest - "as a last resort".
He added: "Bridging loans should never be considered a routine factor. As with all financial products, appropriate advice in individual circumstances is essential."
What's more, Mr Molloy added that there was no way that property chains - where many home sales are linked through the various deals in place - could be completely protected unless laws were altered.
"Broken chains remain a big issue," he explained. "I suspect that we will never totally rid the market of aborted transactions and the attendant broken chains, and certainly not without reform around making the commitment to proceed legally binding earlier in the process."
Figures published recently in the Times suggested that one in three property chains is broken in the UK.
