Bridging finance specialist, Apex Bridging, has conducted an analysis of the current bridging loan market, revealing that homebuyers and sellers could save themselves an average of £1,300 by using bridging loans to avoid the costs that may be incurred if their transaction is in danger of collapse.

The analysis was based on 69 currently available products, which demonstrated that the average bridging loan in the current market comes at a maximum loan-to-value (LTV) of 70%. The average interest rate for a bridging loan is currently 10.8%, with the addition of a 2% setup fee.

Chris Hodgkinson, the managing director of Apex Bridging, stated that bridging loans can be a valuable route to acquiring quick capital, particularly for those who already have an investment plan in place, ensuring that the loan can be repaid in a timely and affordable manner.

However, in uncertain market conditions, bridging can also be a valuable option for residential homebuyers and sellers, helping them avoid their transaction collapsing, which is particularly important today when the conveyancing process is often so unpredictable and elongated.

According to Apex’s findings, the average bridging loan for those who are looking to use bridging for a period of six months would see them pay £15,246 in interest based on the current average UK house price of £294,329.

Although this type of bridging loan would most commonly suit someone who is looking to buy an investment property and refurbish it to improve the condition before seeking long-term financing, other common reasons for bridging require a much shorter loan period, such as rescuing a residential sale from collapse due to delays or broken chains.

In such cases, Apex has found that the interest incurred when using a bridging loan over one month and with no setup fee is £1,854, which compares favourably to the average cost of a fall-through, which is £3,209. It is, therefore, found that a bridging loan can save buyers and sellers £1,355.

According to Hodgkinson, “Even in the instance where a bridging loan costs you more than the average fall-through does, it still saves you huge amounts of time and energy by enabling you to avoid the process of returning to the very start of the buying or selling process.

“To many, this is far more valuable than the marginal additional cost a bridging loan would see them pay.”