The association of short term lenders
Bridging: A solution in the credit crunch
It's not often the case that the media understate bad news... but they have done so with the 'credit crunch'. Because however bad the credit market appears in the media, it is actually much worse in the real world.
The high street banks and building societies - who were falling over themselves to lend three years ago - are today showing little or no appetite for mortgage lending. Now LTV ratios have plummeted and lenders are taking a very long time to complete loans. Today, unless a borrower has a perfect credit history, a steady job and a large deposit to put down, it is almost impossible to raise a mortgage whether it is for a house to live in, a buy-to-let purchase or to raise funds for a business.
The short term lending market has been particularly badly affected, with high street lenders charging substantial arrangement fees and early redemption penalties. It is not uncommon today for a borrower to be charged an arrangement fee of 1% to 2% and to be levied an early redemption penalty of 3% to 4% if the loan is to be repaid within 12 months.
A borrower seeking a 6-9 month loan of £100,000 could easily face fees of £6,000, in addition to interest charges, legal and valuation fees. If, as is likely, base rates start to rise this year, the cost of borrowing from the mainstream lenders will rise further.
It is no wonder, therefore, that borrowers seeking funding for a term of up to 12 months are increasingly turning to bridging companies. The key is for the borrower to choose an established company with a reputation for integrity and performance. These lenders offer a fast, flexible and reliable service and provide a 'hands-on' approach to lending, which is sorely missing from the 'computer says 'no'' style of lending, evident with so many of the mainstream lenders.
Property investment is as much about timing as it is about location . Time the purchase right and you can make a killing. Time it wrong and you can be left holding the property indefinitely. Good quality bridging companies are able to perform extremely fast, with the minimum fuss and that - more than anything else - is what the borrower needs in the current market. If a borrower is able to procure a purchase at a discount to market value, because of the speed with which he can obtain bridging finance, then he will be more than happy to pay the rates being charged by the lender
Whether the client is seeking to raise funds for property trading, development or capital raising, the short term bridging provider holds the solution to beating the 'credit crunch', at a cost which is no longer significantly different to the banks and building societies.
By Peter Bloom, Business Development Executive at BMS