Bridging Finance in the UK: Short-Term Mortgages Explained
In the past, bridging finance in the UK was a little-known solution, often perceived as too expensive and only used for highly specialised property transactions. However, the landscape has changed dramatically. Once the territory of niche lenders, the short-term mortgage market has evolved into a mainstream tool for property investors, high-net-worth individuals (HNWIs), and even developers looking for flexible funding.
Today, increased competition among lenders has lowered short-term mortgage rates considerably. The result? Borrowers can now access bridging finance in a cost-effective way, using it strategically for acquisitions, auction purchases, refurbishments, or simply to resolve complex transactional timelines.
Key Figures Behind Short-Term Mortgages
To understand the growth of bridging loans, data from Bridging Trends offers useful insights. Their quarterly reports show the size and composition of the sector, highlighting how integral bridging finance has become in the overall mortgage market.
- Gross lending surpassed £184 million in Q2 2019, with 81.2% structured as first-charge loans.
- 37.5% of these loans were regulated, demonstrating the growing diversity of borrower profiles.
- The average bridging term was 12 months, although unregulated loans can stretch to 24 months.
- Application times averaged 44 days, slightly up from previous quarters – something to consider where speed is critical.
- The average monthly interest stood at 0.79%, still lower than historical norms for short-term borrowing.
These figures underline the market’s maturity. Where once bridging simply filled gaps, it is now an active part of institutional lending portfolios and increasingly recognised as a precise financing instrument.
What is Bridging Finance Used For?
Far from a last-resort tool, bridging finance today supports a wide range of mainstream purposes. According to industry reports, the most common uses include:
- Property Investment: Accounting for around 25% of all lending, investors use bridging to acquire assets with speed before refinancing onto longer-term mortgages.
- Broken Property Chains: Around 18% of bridging loans are used to prevent sales collapsing, giving buyers the ability to proceed even before their original property has sold.
- Property Refurbishment: Both light and heavy refurbishments often require interim finance before mainstream lenders will consider refinancing at a new valuation.
- Business Purchases: Approximately 12% of loans support commercial acquisitions or capital-raising for operational requirements.
- Auction Purchases: Given the tight 28-day completion requirements, bridging finance is often the only viable solution for auction buyers.
Other uses include regulated and unregulated refinancing, development exits, and cashflow solutions for complex projects.
Why Bridging Finance is Beneficial
So why should bridging finance be on the radar of serious investors and UHNWIs? Its key strengths include:
- Speed: Bridging loans can often be arranged quicker than traditional mortgages, giving clients a competitive edge in fast-moving property markets.
- Flexibility: Funding tailored to complex or time-sensitive scenarios that mainstream banks may decline.
- Leverage: The ability to unlock capital tied up in one asset to pursue immediate opportunities elsewhere.
- Short Tenure: Typically 6–12 months, with the ability to refinance once an exit strategy is in place.
This combination makes bridging finance a sophisticated tool when used with careful planning and broker guidance.
How Articus Finance Can Help
At Articus Finance, we specialise in sourcing discreet, tailor-made short-term funding solutions. Our services cover the full spectrum, including:
- Bridging loans for property purchases, refinances, or releases of equity.
- Residential bridging loans for chain breaks and private acquisitions.
- Unregulated bridging facilities for larger or commercial deals.
- Property refurbishment finance to fund value-add projects before refinancing.
- Development exit finance to release equity prior to final unit sales.
We also work extensively with private banks, ensuring UHNWIs and family offices access bespoke financing with the discretion they require.
Regulatory Considerations
It is important to note that bridging loans can be regulated or unregulated, depending on the borrower’s circumstances. Regulated loans are secured against properties personally used by the borrower or their family, while unregulated loans cover investment or business purposes.
For more detail on regulatory distinctions, the UK’s Financial Conduct Authority (FCA) provides clear oversight and consumer-facing resources to outline protections and responsibilities around bridging finance.
Final Thoughts: Bridging Finance in the UK
The evolution of bridging finance in the UK has transformed short-term mortgages into mainstream tools for investors, property professionals, and HNWIs. With competitive rates, increased lender participation, and widespread uses ranging from auction purchases to development exits, bridging is no longer a niche solution but a versatile financial strategy.
For a tailored approach that aligns with your investment or liquidity goals, explore our guide to short-term finance or contact us directly for discreet advice from our expert brokers.
