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The adoption of bridging loans in the UK has grown steadily over the past decades. With the recent increase in demand from borrowers, a growing number of lenders in the market, and the evolving capabilities of financial technology, it's no wonder this unique lending solution has become a greater area of interest for lenders big and small.

To understand how bridging loans are gaining momentum and solving customer needs, we’re taking a look at their characteristics and benefits, and what is driving its growth in the UK.

What are bridging loans and how did they become popular?

As the home-buying market historically followed a fickle trajectory, customers faced the need to fill a financial gap for the redevelopment, refurbishment, building or buying of a new property. More frequently, they would turn to short-term loans to lower the barrier to entry for borrowing for longer term property needs. Popularly offered by banks, building societies and specialist lenders, bridging loans are a faster, more flexible option which are secured against the homeowner’s existing property value. In the UK, bridging loans rose by 14% since 2021, hitting £716.2 million in total value, the highest figure in three years.

On average, securing a home mortgage can take up to six weeks - a lengthy and time-consuming process for many. Bridging loans act as the in-between of the purchase (or redevelopment) of a property and securing a longer term financing solution, in order to speed up the process and get access to funds faster. And while mortgages are typically taken out on 25-35 year terms, bridging loans are generally offered for one year or less. This allows the home buying or upgrading process to go ahead while a more permanent form of finance like a mortgage can be arranged.

Why more lenders are adding bridging loans to their product portfolio

Demand in the UK property and real estate markets have accelerated despite the economic uncertainty that home buyers and sellers have been facing. This has led to a greater need for alternative lending solutions.

A number of factors have made bridging loans a go-to solution for customers in need of financial coverage. One main cause of their popularity is the tightened criteria for traditional lenders like banks, making it more difficult for some borrowers to obtain financing.

To strengthen the case, bridging loans tend to offer greater flexibility than a traditional mortgage, making this an attractive option for borrowers who need to complete a transaction quickly or who have a short-term need to fulfill. Customers are often willing to pay higher interest rates and fees for the convenience of a loan solution that gets them access to their new home without signing on to a long-term loan.

So, how is Mambu helping lenders build and launch bridging loan products for their consumers?

The power is in the cloud

With the increase in competition, lenders must identify tools which will allow them to offer more seamless borrower experiences. The dynamic and fixed term loans in demand by homeowners and buyers are made more accessible by combining a cloud-native core engine with specialised third-party solution providers in order to build a modern, end-to-end lending architecture.

Mambu's lending platform is designed to be highly scalable, and is continuously iterated to keep up with changing customer needs and market trends. As always, Mambu solutions are born in the cloud, increasing reliability and security compared to on-premise.

From product set-up to account creation and in-loan servicing, Mambu’s bridging loan product capabilities are powered by composability, flexibility and speed. The platform includes a range of features for lenders to customise bridging loan products based on the needs of their end customers, and seamlessly enables add-on services via integrations with ecosystem partners.

Building the bridge for long term success

Bridging finance is a popular way to secure funds fast and is steadily growing in popularity in the UK amongst consumers who are looking for short-term financing to manage cash flows and complete property transactions in situations where traditional financing may not be available or feasible. As financial institutions strategise on new ways to reach a wider audience, providing short, accessible loans will open a greater pool of potential buyers.

With Mambu's bridging loan product capabilities, lenders can create more innovative and customer-centric lending solutions, helping them to attract and retain customers in an increasingly competitive market.

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Nick Lawler
Sales Director UK&I at Mambu
Nick Lawler