{"id":189219,"date":"2025-12-13T05:50:15","date_gmt":"2025-12-13T05:50:15","guid":{"rendered":"https:\/\/www.newsbeep.com\/ie\/189219\/"},"modified":"2025-12-13T05:50:15","modified_gmt":"2025-12-13T05:50:15","slug":"bridging-finance-is-back-on-the-table-for-irelands-homebuyers-the-irish-times","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ie\/189219\/","title":{"rendered":"Bridging finance is back on the table for Ireland\u2019s homebuyers \u2013 The Irish Times"},"content":{"rendered":"

Bridging Finance is back in the news. Once a standard item in the property finance toolbox, it will be an exotic mystery to the generation of homebuyers <\/a>in the market since the financial crash 16 years ago.<\/p>\n

To quote the long-time Ronseal advertising slogan, bridging finance does exactly what is says on the tin \u2013 it provides a bridge to cover a gap in funding. This is not purely a property <\/a>product: bridging finance can be useful in pretty much any area of commerce. But it was in the context of property that it became best known, especially for people caught in property chains.<\/p>\n

If you had found your ideal home but had not yet managed to sell your own, you could tap the banks for bridging finance to span the gap. The bank advanced you a chunk of the money you needed to buy the home, knowing that it would be repaid when your own home was sold. <\/p>\n

[\u00a0Interest rates have hit the floor. Here are the vital lessons for borrowersOpens in new window<\/a>\u00a0]<\/p>\n

And, of course, they were well rewarded, with rates on interest on these short-term bridging loans significantly ahead of standard mortgage rates.<\/p>\n

So, if the rates were so good, why did the banks all pull their bridging products nearly as fast as they axed tracker mortgages? <\/p>\n

\"\"Why are apartments in Ireland so much more expensive to build than houses?<\/p>\n

Bridging finance only works when the banks can be confident they will be repaid within the fairly tight loan window. If not, they have a default with all the chaos that brings. The borrower, too, would only be willing to pay the interest premium where they were sure they could settle the loan fairly quickly.<\/p>\n

Once property values crashed, neither side could have that confidence. Falling property values meant more and more people found themselves in negative equity and unable to make the finances of selling work even where they want to move on. Those who did find themselves in a housing chain \u2013 where access to the home they wanted depended on that homeowner finding a new place to live etc \u2013 could have any real confidence of transactions being completed.<\/p>\n

In those circumstances, banks\u2019 appetite for bridging finance disappeared.<\/p>\n

But now it is back, with Bank of Ireland<\/a> recently announcing that they will resume lending in the new year. They are not the first to dip their toe back into the water. ICS Mortgages<\/a> has that honour, having stepped back into the market in October last year. <\/p>\n

[\u00a0\u2018They could save \u20ac91,440\u2019: How switching your mortgage for home renovations worksOpens in new window<\/a>\u00a0]<\/p>\n

The reason it has returned is related to the crisis in the housing sector. In a normal housing cycle, people trade up from their first homes as families grow. Eventually, as those children move away, people can look to trade down to smaller, more manageable homes.<\/p>\n

But, in recent years, the number of second-hand homes on the market has dropped dramatically. As analysts at stockbroker Davy noted recently, second hand transactions represented 2.25 per cent of the overall housing stock in 2024, meaning that a property was changing hands once every 44 years.<\/p>\n

Part of the reason for that is that people will understandably not take the risk of selling their home \u2013 which they would need to do to raise funds \u2013 before buying their next home, in case the whole thing falls through and they are effectively left without any home and forced into a higher cost and increasingly limited rental market.<\/p>\n

Bridging finance, as ICS Mortgages owner, Dilosk, said when it launched its product, is intended to help ease that bottleneck in the second-hand property market, making it easier for individuals to trade up or down.<\/p>\n

But how does it work and what does it actually cost?<\/p>\n

ICS Mortgages <\/p>\n

ICS offers three bridging products, one for people trading down and two for investors looking to purchase an investment property, renovate it and auction it off.<\/p>\n

Sticking with the trading down option, you can borrow up to 70 per cent of the value of your existing home. <\/p>\n

You can either let the interest roll up with the capital sum \u2013 but the interest rate will be higher and the maximum term you can borrow for shorter, at 12 months \u2013 or pay the interest as you go along, which case you can extend the loan period to a maximum of 18 months.<\/p>\n

The amounts ICS will allow you to borrow range from \u20ac100,000 to \u20ac1.5 million. And apart from the interest rate, you will be charged an arrangement fee equal to 1 per cent of the loan.<\/p>\n

You need to be aged between 21 and 70, with minimum annual income of \u20ac40,000, and you must live in certain parts of the State \u2013 Dublin and its surrounding commuter counties (Kildare, Wicklow, Meath, Louth), Galway, Cork, Limerick, Dundalk, Drogheda, Waterford city or in another urban centre with a population of more than 5,000 people.<\/p>\n

On the trading down product, the rates of interest you will pay vary from 11.32 per cent where the borrower is paying down the interest to 11.72 per cent where that interest is rolling up with the capital.<\/p>\n

The buy-to-let products have slightly higher interest rates running up to 12.56 per cent.<\/p>\n

Bank of Ireland<\/p>\n

Given that you can find mortgage interest rates below 3.5 per cent in the market, this ICS product is certainly not cheap. And given that interest tends to be charged monthly, you can be left with hefty monthly payments.<\/p>\n

That might be what has tempted Bank of Ireland to become the first of the big lenders to step back into the market with a product specifically designed for people trading down.<\/p>\n

While it announced its return to bridging in November, Bank of Ireland will not actually be offering this product until some time in the first quarter of the new year so there are many details yet to be tied down.<\/p>\n

However, we do know some key elements of the product \u2013 most importantly, the interest rate. Bank of Ireland says its Trade Down loan will be available at a variable rate, initially 7 per cent. <\/p>\n

That\u2019s significantly cheaper than ICS\u2019s rate and may trigger some real competition in this sector of the market, especially if other lenders get involved as I suspect they will.<\/p>\n

The maximum you will be able to borrow is less than at ICS at 60 per cent of the value of your current home and the maximum term will be 12 months. Both your existing home and the one you are using the bridging finance to purchase will act as security on the borrowings.<\/p>\n

You won\u2019t have to be a Bank of Ireland customer to access this product, though I am guessing it will make things easier if you are. While not available until the new year, the bank is already taking expressions of interest from people considering such a loan.<\/p>\n

One common element of the bridging loans, either now available or on the way, is that they target people trading down from bigger homes. But those with growing families who are looking to trade up \u2013 move to bigger homes \u2013 are likely a bigger market, and one with fewer financial resources to bridge any funding gap. Bank of Ireland says it is \u201cexploring\u201d bridging products for this group so that might follow later next year.<\/p>\n

As Davy notes, the greater availability of bridging products in the Irish market should remove some financial friction points and result in an increase in liquidity in the market \u2013 i.e. more homes for sale.<\/p>\n

But the one overarching piece of advice regarding bridging is that you should only consider it when there is a realistic end point in sight. This is expensive money. Resorting to bridging just to buy a new home when you have not even started the process of selling yours runs the risk of running down a costly financial rabbit hole.<\/p>\n

I expect Ireland\u2019s lenders, now notoriously risk averse, will be careful in which applications they actively consider but, as always, it is up to the consumer to be sensible in their financial planning.<\/p>\n

You can contact us at OnTheMoney@irishtimes.com<\/a> with personal finance questions you would like to see us address. If you missed last week\u2019s newsletter, you can read it here<\/a>. <\/p>\n","protected":false},"excerpt":{"rendered":"Bridging Finance is back in the news. Once a standard item in the property finance toolbox, it will…\n","protected":false},"author":2,"featured_media":189220,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[101939,72,61,60],"class_list":{"0":"post-189219","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-bridging-loan","9":"tag-business","10":"tag-ie","11":"tag-ireland"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/189219","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=189219"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/189219\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/189220"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=189219"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=189219"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=189219"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}