More borrowers using bridging loans just to survive in slowing property market, experts warn
By Douglas Patient ·
More borrowers are using expensive bridging loans just to survive in a slowing property market, experts have told Newspage.
Nearly one in five bridging loans are now being used to stop a house move from collapsing, Bridging Trends research found.
A total of 18% of loans taken out between April and June were used to prevent a chain break, increasing from 14% in the first three months of the year.
Almost a quarter of house sales initially fall through, with around 6% collapsing and then staying off the market for at least 12 months.
Sellers aiming to rescue a sale by using a bridging loan are paying an average rate of nearly 10% a year before fees.
More homeowners are now borrowing alongside their existing mortgage, with second-charge loans rising from 9% to 22% of all bridging loans between the first and second quarters, the highest share since early 2021.
Tony Sanchez, Founder at Bridging Loan Directory, said borrowers should understand the extra costs before committing to a bridging loan.
He added: "Saving a property chain is not necessarily a sign that someone is borrowing just to survive. A bridging loan can solve a timing problem, but the key question is what happens if the expected sale takes longer or achieves less than hoped.
"We’ve seen delayed exits lead to additional interest, extension fees and fewer refinancing options. Buying more time only helps if there is a realistic route to repayment. Before committing, borrowers should understand the total cost, what happens at expiry and whether accepting a lower sale price could leave them better off than borrowing to hold out for more.
“Keeping an existing mortgage through a second-charge loan doesn’t remove those questions.”
Nouran Moustafa, Practice Principal & IFA at Roxton Wealth, said you could be “stacking expensive debt against the same property”.
She added: “Bridging is increasingly being used as financial breathing room, but there is a huge difference between solving a temporary timing problem and borrowing simply to keep an unaffordable situation alive. At nearly 10% before fees, this is expensive money.
"Before taking a bridge, I want to know exactly how it gets repaid, what happens if the sale takes six months longer, and whether the numbers still work if the property sells below expectation. A second charge can make sense because it may allow someone to keep an existing first mortgage, particularly if that rate is attractive.
"But you are still stacking expensive debt against the same property. My rule is simple: a bridge needs a believable exit and enough headroom for things to go wrong. A bridging loan should be a bridge, not financial life support.”
Harvey Dhillon, Founder & CEO at Zmartly, said the trend is worrying.
He added: “Some people will be using bridging loans just to survive, and I'd worry most about anyone bridging against a house that hasn't found a buyer. Borrowing alongside your existing mortgage only makes sense if the sale can pay off both loans and any tax.
"If the bridge is repaid by selling your own home, there's usually no capital gains tax. If you're selling a buy-to-let, a second home or an inherited house, there may be, and the timing is easy to miss. On completion, your solicitor pays off any loan secured on the property and sends you the balance.
"Capital gains tax isn't part of that: you report and pay it yourself, and on a property sale HMRC doesn't wait for your next tax return. If the bridge and its interest take most of the sale money, that bill has to come from somewhere else, so work it out before you borrow.”
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