Bridging loans typically bridge the gap between purchasing a new property and selling an existing one, providing borrowers with the flexibility and liquidity they need during transitional periods.
Barclays has been catering to the financial needs of its customers since 1690. With a reputation for reliability and innovation, Barclays offers a range of financial products to assist individuals and businesses in achieving their goals.
They no longer offer bridging loans, however. Like most high street banks, they ceased offering these after the credit crunch of 2008. Since then, the bridging loan market is largely catered for by alternative, specialist lenders.
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- Loans from £20,000 to £30m plus
- Max 75% LTV first charge 70% second charge
- Secured on Residential and Commercial property
- Adverse credit considered
- Both Regulated and Non-Regulated Bridging Loans
Who are Barclays Bank?
Founded in 1690, Barclays has evolved to become one of the leading global banks, providing a comprehensive range of financial services to individuals, businesses, and corporations.
Headquartered in London, United Kingdom, Barclays operates in various sectors, including retail banking, investment banking, wealth management, and credit cards. With a strong presence in both domestic and international markets, the bank serves millions of customers across the globe.
The bank’s comprehensive suite of products includes current accounts, savings accounts, mortgages, loans, credit cards, and investment options, among others.
Barclays Bank has also gained recognition for its dedication to corporate social responsibility and sustainability initiatives. It actively supports various community projects, environmental causes, and initiatives focused on promoting social and economic development.
Does Barclays Bank offer bridging loans?
Barclays Bank does not offer bridging loans. However, they do provide other types of secured loans, such as home improvement loans, which can be utilized for specific purposes.
The high street banks, including Barclays, HSBC, Lloyds, and Natwest, completely ceased offering bridging loans during the credit crunch.
Following the recession, the major banks did not regain their interest in providing short-term bridging loans and chose not to re-enter the market. Bridging loans represented a small portion of their lending business, and the banks preferred to concentrate their resources on more popular facilities such as mortgages, business loans, and personal loans. The banks made cutbacks and implemented cost-saving measures, discontinuing bridging loans to save on staff training and qualified advisors required to handle such applications.
Although the high street banks stopped offering bridging loans, some of them remain indirectly involved in the bridging industry. For example, Barclays Bank provides funding to several bridging loan providers who, in turn, offer direct bridging loans to customers.
New lenders have emerged to fill the gap in the market. These lenders provide bridging loans and have expanded their product range to include residential, buy-to-let, and commercial mortgages. Some bridging lenders have even transformed into full-fledged banks themselves.
Barclays Bridging Loans Key Features
While Barclays no longer offer bridging themselves, understanding the typical features of bridging loans in general can offer valuable insights.
The key features of general bridging loans are as follows:
- Speed of Approval: Bridging loans are known for quick processing times, often within a matter of days, allowing borrowers to seize time-sensitive opportunities.
- Flexible Terms: These loans usually have a tenure ranging from a few weeks to 24 months, offering flexibility to suit various needs.
- High-Interest Rates: Given their short-term nature, bridging loans typically come with higher interest rates compared to conventional loans.
- Security Requirements: These loans are often secured against assets, usually real estate, to mitigate the lender’s risk.
- Exit Strategy: Lenders require a clear exit strategy, detailing how the loan will be repaid at the end of the term.
- Versatility: While commonly used in property transactions, they can also finance business ventures, debt consolidation, or other large expenditures.
What do the interest rates look like on Barclays bridging loans?
Here are the typical rates you’ll find in the bridging market today:
- Current bridging loan rates tend to range from 0.40% to 0.80% per month. On an annualized basis, this works out to between 4.8% and 9.6% interest. However, bridging loans are designed to be paid back quickly, so the actual annual interest rate paid is lower.
- Interest rates on bridging loans can be variable or fixed. Variable rates move up and down based on market conditions. Fixed rates remain the same over the loan term but tend to be higher than variable rates initially.
- Factors that affect bridging loan interest rates include the loan-to-value ratio, credit score/history of the borrower, loan term, type of property, and overall market conditions. Higher LTVs or riskier borrowers get higher rates.
- Bridging loan rates today are still relatively low compared to historical averages, due to continued low interest rate environment. But rates are expected to rise gradually in the near future as central banks combat inflation.
Typical Criteria for a Bridging Loan from lenders such as Barclays Bank
Most lenders work on variations of the following criteria:
- Property Value – The property needs to be valued at a minimum amount, often £100k or higher. Lenders will lend a percentage of the property’s value, usually up to 70%.
- Borrower’s Financial Situation – The borrower must demonstrate sufficient income and assets to afford the loan. Lenders will review credit history, existing debts, and income/expenses.
- Loan Purpose – A clear business purpose is required, such as financing a property development project or new property purchase. Bridging loans are not for personal expenditure.
- Exit Strategy – The borrower needs to provide a credible exit strategy to repay the loan, such as selling the property or securing a mortgage. This gives lenders confidence they will be repaid.
- Deposit – A substantial deposit is typically required, often 40% or more of the property’s value. The higher the deposit, the better the loan terms.
- Property Type – Most lenders will consider residential and commercial properties. Unusual property types may be refused.
- Loan Term – Bridging loans are designed as short term financing for less than 12 months. Longer terms may be available but have higher interest rates.
- Credit History – While criteria varies between lenders, a strong credit history and clean credit report helps obtain better loan terms.
- Fees – Arrangement fees typically range from 1-5%. Other fees may include valuation and legal costs.
What are the Best Alternatives to a Barclays Bank Bridging Loan?
Considering the absence of bridging loan offerings from high street banks, including Barclays Bank, seeking alternatives becomes crucial. In such a scenario, engaging an established and knowledgeable broker who has access to and expertise in the alternative lending market is often the best option.
These experienced brokers specialize in bridging loans and possess extensive knowledge of the various lenders operating in the market. They can guide borrowers through the process, offering valuable insights and assistance in finding suitable alternatives.
By working with a broker, borrowers gain access to a wide range of alternative lenders who specifically focus on providing bridging loans. These lenders are well-versed in the intricacies of short-term financing and understand the unique needs of borrowers in these situations.
Brokers can leverage their relationships with these alternative lenders to present borrowers with a variety of options. They can negotiate competitive interest rates and favourable terms on behalf of their clients, ensuring they secure the best possible deal.
Additionally, brokers can provide valuable advice throughout the process, helping borrowers navigate complex documentation, eligibility criteria, and repayment options. They act as intermediaries, streamlining the application process and facilitating communication between borrowers and lenders.
Barclays Bank Bridging Loan FAQS
How does a bridging loan differ from a traditional mortgage?
A bridging loan differs from a traditional mortgage primarily in terms of purpose and repayment timeline. A bridging loan is a short-term financing option designed to bridge the gap between purchasing a new property and selling an existing one. It provides borrowers with immediate access to funds to complete a property transaction quickly. In contrast, a traditional mortgage is a long-term loan used to finance the purchase of a property over an extended period, typically ranging from 15 to 30 years.
What are the typical uses of a bridging loan?
Bridging loans have diverse applications. Some common uses include:
- Property chain completion: Bridging loans can help avoid a break in a property chain by providing the necessary funds to complete the purchase of a new property before the sale of an existing property is finalized.
- Property auctions: Bridging loans can be used to secure a property at an auction, where quick completion and immediate funding are often required.
- Property development: Bridging loans can provide funding for property developers to purchase land or properties, carry out renovations, or fund construction projects.
- Property refurbishment: Bridging loans can finance renovations, refurbishments, or conversions of properties to increase their value before selling or renting them out.
- Business purposes: Bridging loans can assist businesses in various scenarios, such as bridging cash flow gaps, financing business acquisitions, or supporting temporary expansion plans.
How long is the repayment period for a bridging loan?
A bridging loan’s repayment period is typically shorter than a traditional mortgage. It can range from a few weeks to several months, with a maximum term of usually up to 12 to 24 months, depending on the lender. The actual repayment period depends on the individual circumstances, the purpose of the loan, and the lender’s terms and conditions. It is important to discuss the repayment terms and options with the lender to ensure they align with your financial situation and objectives.
What are the eligibility criteria for obtaining a bridging loan?
Eligibility criteria for bridging loans may vary depending on the lender and the specific loan product. However, some common eligibility factors include:
- Adequate collateral: Bridging loans are typically secured against property or other valuable assets. The lender will assess the value and suitability of the collateral provided.
- Exit strategy: Lenders will evaluate the borrower’s plan for repaying the bridging loan, such as the sale of a property or refinancing through a long-term mortgage.
- Financial stability: Lenders may consider the borrower’s income, credit history, and overall financial stability to assess their ability to repay the loan.
- Property details: If the bridging loan is property-related, lenders will examine the details of the property being used as collateral, including its market value, condition, and location.