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Bridging loans 'becoming more important' during credit crunch
Bridging loans that provide homebuyers with the funds to buy their new house while they wait to sell their old one can perform "an ever more important role" during the credit crunch, a financial expert has said.
Lee Tillcock, editor of Business Moneyfacts, said the loans, which are intended as short-term deals and usually come with high interest rates, are "ideal" for situations where funds are needed quickly to get a housing chain moving.
Demand for the loans, he said, can rise during times of financial stress.
"Indeed, in an environment where credit is harder to secure, bridging finance can perform an ever more important role, providing short term solutions while that ever-more-elusive long-term mortgage is finalised," he commented.
Mr Tillcock added that bridging loans can also be useful for investors looking to buy property at auction.
However, James Molloy of AA Legal Services recently said that bridging loans should not be considered a "routine factor" in property deals and said most consumers should only use them when it is "absolutely unavoidable".