Castle Trust Bank has introduced a new ‘Bridge the Gap’ product to offer a flexible solution for borrowers who are approaching the end of a current fixed rate or bridging loan but are reluctant to lock into a new buy-to-let mortgage at this stage of the current interest rate cycle, due to increased expectations of rate reductions during 2024.

The lender believes the product will also be useful for property investors who want to gain a letting track record on the property before committing to a long-term loan, as some lenders will want to see at least 12-months’ worth of borrowing history before offering terms.

The bridging loan features a term of 12 months, with serviced interest, and a reduced interest rate of 0.52% pcm (equivalent to an annual rate of 6.24%) and carries ERCs for just 3 months.

This option to service the loan enables property investors to borrow more on day one, with the maximum available loan being 75% LTV, including arrangement fee. Where interest is rolled up, the maximum loan is 75% LTV gross. The arrangement fee on the Bridge the Gap product is 5.5% with no exit fee.

Anna Lewis (pictured), commercial director at Castle Trust Bank, said: “Bridge the Gap is a product that specifically addresses a growing demand that brokers are seeing for bridging finance that can buy property investors time whilst they wait in hope that rates will continue to fall in the next year.

“By introducing a 12-month bridge loan with a reduced interest rate, increased arrangement fee and no exit fee, we can provide investors with the flexibility that they need to best manage the rate cycle. If investors have tenants currently paying rent, they could opt to service the loan payments instead of rolling the interest as the monthly payments on Bridge the Gap are more affordable, aligning with rates currently available in the buy-to-let market.”