16-10-2007
CML expresses caution over bridging loans
The Council of Mortgage Lenders (CML) has advised borrowers to be in possession of an exit strategy when opting for a bridging loan, it has been revealed.
According to comments made by a representative of the CML, although bridging loans are the obvious path to take when there is a discrepancy between selling a property and buying another, any borrowers opting for this path should have an exit strategy in place.
Bridging loans are known to be an expensive form of borrowing money and are generally arranged for a period of between two weeks and three years.
"Entering into a bridging finance contract without knowing what your subsequent rollover strategy is does not make any sense," said the CML representative.
"It shouldn't necessarily be seen as a long-term solution to any property-related transaction," she added.
Although bridging loan interest rates vary, they are frequently set at a rate of between two and 2.5 per cent above the Bank of England's base rate, according to thisismoney.co.uk.