Do banks in the UK offer bridging loans anymore?

Thursday 1st December 2022 | 3 minute read

Does HSBC, Santander, Lloyds Banking Group, Standard Chartered, NatWest Group or Barclays plc still offer bridging loans?

Frome Highstreet showing Natwest bank

Sourcing fast, short-term bridging finance from the major UK banks isn't easy - but is it impossible? Find out if HSBC, Santander, Lloyds Banking Group, Standard Chartered, NatWest Group or Barclays plc still offer bridging loans, and what your other options are to raise the bridging loan you require.

Almost all major UK Banks do not offer commercial bridging loans

Most major banks do not offer traditional commercial bridging loans of a high risk nature, and now only offer alternative loans that adhere to strict eligibility criteria.

A few high street banks do still offer bridging loans to enable existing customers who want to buy a house before selling theirs which was the original purpose of bridging finance. 

Non-status lending, bad credit, high LTVs and urgent bridging loans cannot be found on the high street and of the 8 major UK banks, only one offers a bridging loan product.

What are the 8 major UK Banks?

The UK banking sector consists of a number of private UK banks, international banks, and building societies. A few large banks dominate the sector, competing for market position.

In total, there are currently 344 banks in the UK and 52 building societies.

The biggest 8 banks in the UK in 2023 are:

  • HSBC Holdings PLC.
  • Santander UK Group Holdings PLC.
  • Lloyds Banking Group PLC.
  • Standard Chartered PLC.
  • NatWest Group PLC.
  • Barclays PLC.

The reason why high street Banks don't offer bridging loans

Bridging loans are a type of loan used to bridge the gap between a long-term loan and short-term need for capital. Banks in the UK have traditionally offered bridging loans, but in recent years, bridging loans have become a product more associated with specialist lenders.

The main reason banks in the UK do not offer bridging loans anymore is because they are seen as too risky.

Since the credit crunch of 2008, and the ensuing Great Recession, lending criteria for high risk loans such as bridging finance was significantly regulated by government which stopped high street banks being allowed to make high risk loans. This led banks to effectively cut much of their business lending by £90bn in the following ten years.

As the Bank of England comments, "In 2008 an unsafe financial system caused financial crisis and economic disaster. Global production plummeted, the number of people who lost their jobs soared, and governments around the world used taxpayers’ money to save banks from failure in order to prevent a global depression. Since the crisis, the Bank of England has been building a safer system bolstered by two important institutional innovations. First, it has been given responsibility for the supervision of individual banks and building societies. Second is the creation of an authority in the Bank with new powers – the Financial Policy Committee – tasked by Parliament to monitor risks in the financial system that could cause problems for the wider economy."

The rise of the specialist bridging loan lender

As the lending criteria became more stringent fewer and fewer bridging loans were available in the UK. The lack of availability from banks gave rise to a number of specialist lenders entering the market from 2008. Whilst the history of bridging loans can be traced back much further than 2008, the combination of the credit crunch and the ensuing house price crash created ideal market conditions for commercial bridging opportunities such as property development finance.

These new lenders began offering bridging loan facilities for a variety of reasons including to purchase residential and commercial property, funding development projects, debt consolidation and financing auction purchases. More importantly this new breed of lenders were very comfortable with high risk high reward short-term lending scenarios. Non-status lending, bad credit lending was acceptable, as was securing large value finance on residential property.

Are bridging loan interest rates higher than Banks?

Historically, specialist bridging lenders offer higher rates than banks loans due to the increased risks associated with these types of loans, but they are also significantly more flexible in terms of their lending criteria. 

Recent successive increases in the Bank of England's base rate have caused challenges in the mortgage markets leading to many rate increases and mortgage products being pulled.

Costs of borrowing generally have increased sharply in the past 12 months which makes bridging loans less expensive when compared to the high street banks headline rates for other borrowing.

Average interest rates in the UK as of 08 June 2023

Loan Type APR
Credit Cards 20.69%
Home Mortgages (5-Year fixed) 5.59%
Home Mortgages (Standard Rate Variable) 7.99%
Home Mortgages (2-Year Standard Variable) 5.14%
BTL Mortgages  5.18%
Bridging Loans (Loans below £1,000,000 12.00%
Bridging Loans (Loans over £1,000,000 5.28%

Whilst all loans currently carry a typical interest rate of in excess of 5% there are also often large arrangement fees and other charges as well to consider, which will add to the overall cost of the loan.

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