Why bridging is the only word customers looking for short-term solutions need to know

The following article is supplied by Precise Mortgages.
What do the words ‘hallucinate’, ‘implode’ and ‘GOAT’ all have in common?

Not sure what the connection is? Well, according to the Cambridge Dictionary all of them were among the most searched for words on its website in 20231.

‘Hallucinate’ topped the list due to the rapid rise of AI and concern about false information, ‘implosion’ appeared due to the number of people looking up the definition after the tragic loss of the Titan submersible in June and ‘GOAT’ featured as the Qatar World Cup provoked a new debate about which football player is the greatest of all time – Lionel Messi or Cristiano Ronaldo?

So, why am I asking you this? Well, following a year which has seen more and more homeowners choosing to move to smaller properties, it wouldn’t have surprised me if Cambridge Dictionary had included the word ‘downsizing’ on its list.

What is downsizing?

According to home experts Hamptons, the number of people looking to downsize hit a seven year high in 2023. Hamptons’ research found that 41% of movers have reduced their bedroom count in the past year, a considerable increase from 32% in 2022 and 33% in 2019. In fact, the spike is the highest Hamptons has seen since it began recording such data back in 20162.

A period of relative inactivity due to factors such as COVID-19, rising energy costs and soaring interest rates, as well as a desire to clear the final years of their mortgage, has prompted a surge in people looking for homes with fewer bedrooms and less property to maintain.

And as many downsizers often prefer to find their next home before putting their current one up for sale, it’s essential they have the finance in place to enable them to make the purchase before their target property gets snapped up.

It’s this need for short-term funding which may explain why bridging finance reached record levels in Q3 of 2023. Figures recently released by the Association of Short Term Lenders show that loan books hit £7.3 billion in the last quarter, the second successive quarter borrowing has exceeded £7 billion, a new high3.

Why is bridging finance so popular?

Bridging finance offers customers the opportunity to stand outside of a property chain, giving them the freedom to purchase a new home without having to depend on everyone else completing first. It can even be used if a potential buyer of their current property has withdrawn and the chain has completely collapsed.

And chain break finance isn’t all a bridging loan can be used for. Thanks to its flexible nature, it could also be suitable for:

• Auctions – When it comes to purchasing a property at auction, speed is often of the essence and a bridging loan could provide a real advantage compared with a lengthier, more traditional mortgage process.
• Renovations – While refurbishing a new property, customers may wish to retain their current home. In this case they’ll still be paying their existing mortgage and the equity won’t be available to fund the refurbishment project. A bridging loan could help during this period of change until the original property is sold.
• Expansion of property portfolios – Your landlord customers could purchase quickly, aiding growth of their portfolio with a bridging loan.
• Cash flow – Bridging finance could make funds available for your customer’s business development.
• Refurbishing uninhabitable properties – As your customers may struggle to get a mortgage on an uninhabitable property, they could get a bridging loan to complete works needed, then once it is habitable, apply for a traditional mortgage.
• Property conversion – Bridging finance could be useful in the interim during the process of turning single units into flats.

How Precise Mortgages could help

If you’re approached by a customer looking for a short-term loan, it’s important you choose a lender who’s experienced at dealing with bridging finance.

We offer up to 75% LTV on standard and tier 1 refurbishment, and up to 70% LTV on tier 2 refurbishment. Plus, we have AVMs (Automated Valuation Model) available for standard bridging finance products up to 60% LTV, and with no fee. We also offer joint or separate legal representation in England and Wales to help keep your customer’s costs under control.

And that’s not all. Our refurbishment buy to let proposition now offers a choice of three exits depending on the type of work being carried out. It could be the ideal solution for those looking to fit a new bathroom or kitchen; install double glazing to improve the energy efficiency of a property; or improve a property that already has a high EPC rating.

If you’d like to find out more or have a question about how our bridging offering could help, speak to your specialist finance account manager, call our dedicated bridging underwriting team on 0800 116 4385 or take a look at our bridging finance products.

Sources:

_{1 https://www.cam.ac.uk/research/news/cambridge-dictionary-names-hallucinate-word-of-the-year-2023}

_{2 https://www.hamptons.co.uk/articles/downsizers-take-centre-stage-in-the-2023-housing-market#/}

_{3 https://theastl.org/index.php/2023/11/10/bridging-loan-books-hit-new-record-high/}