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2 homes, no buyers: The hidden danger in Australia’s bridging loan boom
Home owners using bridging loans to purchase their next property could be forced into selling their existing homes on unfavourable terms, as slowing transactions leave borrowers racing against looming repayment deadlines.
Praedium Partners accountant Jeremy Iannazzelli said the slow pace of transactions and soft consumer sentiment had left buyers risking the significant financial stress of paying out of pocket on two properties.
“If they’ve taken a bridging loan in this market, it’s probably the worst environment to do so. It’s not because of the price movements; it’s because of the lack of motivation for buyers to be in the market,” Iannazzelli told SPI.
“That’s placing significant stress on anybody who already has bridging finance or who was considering getting bridging finance.”
Non-bank specialist lender Bridgit, which specialises in bridging loans, recorded a 168 per cent increase in loan submissions between FY2024–25 and FY2025–26.
Bridging loans, in which a lender guarantees a portion of the total loan amount to let the borrower buy a new property before selling their old one, have grown in popularity as a way to enter the property market.
Interest rates typically range between 6 and 10 per cent, with clients making interest-only payments for a typical 12-month term.
Iannazelli said borrowers using a bridging loan had to accept the higher interest rate in return for added flexibility in securing their new home.
“They’re paying a substantially higher amount of interest on a loan that the bank has told them and advised them is not a loan forever.”
“It is not a long-term play; the bank has only provided a short-term solution for you to sell your old and buy your new. It’s outside the standard borrowing power limits because it’s only meant for a short period of time.”
Iannazzelli said he had seen far fewer instances of clients using bridging loans because they lacked confidence in their ability to sell their existing home.
With a predetermined timeline set as part of the loan, Iannazzelli said vendors could be forced to transact on less favourable terms for their old property if they couldn’t settle before the date.
“If the bank doesn’t see that the property is sold, they’ll advise the individual that they either A, have to pay back the bridging portion of the finance, or B, they’ll force the sale of the home to pay themselves back.”
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“Which means that the vendor may no longer be in the position to take the price that they want; they’ll be forced to take the position the bank needs.”
Despite prices falling across the nation, Iannazzelli said the biggest factor weighing on these loans’ popularity was softening consumer sentiment and declining transaction volumes.
He said a lack of confidence in the property market was creating a stalemate and increasing risk for borrowers using a bridging loan.
“The challenge is not the market falling. The challenge is the time that it’s taking for someone to sell their home.”
“The market at the moment is a very scary thing for anybody who currently has bridging finance or who is looking to obtain it,” Iannazzelli said.
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