Bricks, Mortar and Bridging Loans

Is it a good time to buy property, and what do you need to know? We asked the experts from Market Financial Solutions

What’s the current state of the UK property market?

Buoyant – that is the only word for it. The major indices have been indicating house price growth in excess of 10% over the past year, which is remarkable.

High levels of demand that built up during the early months of the pandemic, the incentive of the stamp duty holiday and low interest rates have combined to ignite the property market, with buyers and sellers alike keen to capitalise on this.

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How much did the pandemic affect sales and prices?

During the first lockdown in the UK between March and June 2020, sales dried up and prices dipped. It was almost impossible to conduct viewings of properties, while moving house was also discouraged. The entire market almost ground to a halt.

However, since July last year the market has bounced back emphatically. There was naturally a backlog of prospective buyers who re-entered the market, but in truth the stamp duty holiday has inspired both domestic and international buyers to consider property investments. Prices have rocketed as a result – data from Nationwide, for example, showed that in May there was a new record average house price of £242,832 in the UK, up £23,930 in the space of a year.

How would you predict the market will develop in the next 12 months?

The pace of growth will almost certainly slow down – the current rate cannot be sustained in the longer term. But rumours of prices falling once the stamp duty holiday ends seem ill-judged.

The stamp duty holiday tapers down from July to September 2021, before returning to normal levels from 1st October. Over this period, prices will stabilise, but demand will likely remain high – indeed, high demand for residential properties in the UK is almost constant.

It will also be interesting to see how homebuyers’ preferences change. During the pandemic, with remote working the norm and lockdown rules in place, there has been a rise in the number of people seeking properties in greener, rural areas. Yet, as society opens up again, this trend may reverse to what we have seen over recent decades; namely, towns and cities attracting the most attention.

Has there been a shift to out-of-town buying? What are homebuyers now looking for?

There has been a shift towards rural areas. This is a logical consequence of people no longer having to commute to the office and lockdown rules meaning that most retail, hospitality cultural and leisure venues have been closed. So, people have sought greener areas, where they might also get more for their money.

Indeed, a recent survey of 1,280 UK homebuyers, commissioned by MFS, found that outdoor space, broadband connectivity and proximity to parks had all become far more important considerations compared with two years ago.

Homebuyers have also been seeking properties with more bedrooms, which is likely due to the fact that people are desiring additional rooms that could be used as a study or home office, with remote working projected to become more normal even once the pandemic has passed.

Why might I need a bridging loan?

There are many reasons why someone might require a bridging loan. One of the most common is that they want to complete on a property purchase while they are waiting to sell another property or asset – as the name suggests, a bridging loan enables them to bridge this financial gap, with the eventual sale of their existing asset then allowing them to repay the bridging loan.

Speed is a regular theme that appears when people are seeking a bridging loan. Unlike a mortgage, which can take many months to arrange, a bridging loan can be facilitated in a matter of days. As such, it can help avoid delays in the property-buying process, and also prevent complicated chains by allowing buyers to proceed with deals even if they are needing to sell another house or flat. To help with the upcoming stamp duty deadline, MFS have launched 75[3] which will allow purchasers to complete before the stamp duty deadline, and then pay back the bridging loan when a long-term finance solution is in place.

What’s the difference between a regulated and unregulated bridging loan?

When it comes to bridging finance there are two common types of loans you can use: regulated and unregulated.

Regulated bridging loans are used by homeowners who have found themselves falling short of funds, often due to delays. The Financial Conduct Authority (FCA) regulates such loans – it aims to protect consumers from incorrect advice and misleading behaviour from lenders and brokers. It also promotes fair competition.

Unregulated bridging loans are typically favoured by intermediaries, property investors and property developers, often to ‘bridge’ a payment gap with a tight turnaround. The FCA does not offer protection for bridging loans used to secure an investment property, buy-to-let investment, or commercial real estate.

As such, prospective borrowers must research their options and find a lender that has experience and expertise catering to their particular needs. Indeed, it is the use of the loan that will typically dictate whether someone goes for a regulated or unregulated option.

How easy is it to apply for a bridging loan?

Applying for a bridging loan is fast and easy. That is not to say that borrowers and brokers should not conduct thorough due diligence – similarly, so must a lender. Yet the entire process is typically far quicker than, say, a mortgage application.

After all, speed is vital in many bridging cases. The best bridging lenders work closely with clients to deliver the best possible product for their circumstances; in doing so, a lender like MFS will take the pain of the entire process. In fact, MFS can deliver a bridging loan within as little as three days from having received the initial enquiry.

How can I work out what a bridging loan will cost me?

Some lenders, including MFS, offer online calculators so potential clients can see how much they can borrow and what the repayment structure will look like.

The best lenders pride themselves on offering a transparent service, meaning they ought to be upfront about the costs, timelines and processes involved.

Where can I find out more about MFS and its services?

To find out more about MFS, visit our website. It explains more information about MFS and its services – it also hosts a vast amount of interesting and useful content, including guides about how to effectively use bridging loans, and case studies from the MFS team.

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