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The bridging evolution: A valuable option for older people

by: Benson Hersch
  • 17/03/2015
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The bridging evolution: A valuable option for older people
As bridging finance is increasingly pushed into the mainstream lending market, there are opportunities for older borrowers to take advantage of these products, writes Benson Hersch, CEO of the Association of Short Term Lenders.

It is no news to anyone that the mortgage market has changed in the post credit crunch era. First the Mortgage Market Review (MMR) and now the European Mortgage Credit Directive (MCD) has kept lenders and intermediaries on their toes.

Bridging finance will be largely excluded from the UK’s legislation incorporating the MCD, but it is increasingly becoming a mainstream product. During the credit crunch it filled many a gap left by mainstream lenders because their criteria were too tight.

With lending into retirement often a no-go for high street lenders, there is a growing need for both older people and their financial advisers to look for more creative options.

Bridging finance helps people who need short term finance; but who struggle with affordability criteria. These criteria do not apply to bridging loans where interest payment is deferred until a sale takes place and the loan is redeemed.

Many older people want to downscale and move into a retirement home or bungalow. This trend may be exacerbated if a mansion tax is imposed. Purchasing these properties typically involves a very short decision window. A bridging loan can enable them to purchase a new home while choosing the best time to sell their old one.

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The evidence that more brokers are considering bridging loans was apparent in the latest Association of Short Term Lenders (ASTL) member figures. Applications for bridging loans increased by 97% in Q4 2014 compared to Q4 2013.

While there is still a level of misapprehension about bridging loans by mortgage brokers unfamiliar with them, hopefully it will become increasingly clear that this is misplaced.

Standards have risen significantly in the bridging market while increased competition has driven rates down to the lowest seen in years; making bridging a viable option for many people who may once have considered it too expensive.

Most bridging lenders deal primarily through the intermediary market, so it is in their interest to make it easy for brokers to do business with them.

Finally, to ensure that the lender you deal with adheres to the highest standards of service and transparency, choose an ASTL member as they all subscribe to a strict code of conduct.

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