'Exit strategies' needed for bridging loans

Tue 16 Oct 2007 3pm

Homebuyers have been advised to use caution and plan carefully when arranging a bridging loan.

While admitting that this type of loan is "the main and obvious route" open to people who need financial help to overcome a gap between buying a new house and selling their old one, the Council of Mortgage Lenders urged consumers to plan a clear "exit strategy" before proceeding.

A spokesperson for the organisation said that bridging loans should not be viewed as a "long-term solution" to problems with buying property, although she conceded that such loans do "have their uses".

"Entering into a bridging finance contract without knowing what your subsequent rollover strategy is does not make any sense," she stated.

Usually subject to high rates of interest and large entry and exit fees, bridging loans are used by house-buyers to keep their finances in tact while the complicated process of moving between properties is finalised.

A recent survey by currency specialist HiFX stated that 40 per cent of British homeowners would consider emigrating in order to escape their mortgage.

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