DIKSIA.COM - The demand for bridging loans has surged exponentially, defying conventional projections. Bridging Trends recently reported a staggering 68% increase in bridging transactions, amounting to £278 million, between Q4 2022 and Q1 2023.
However, the most compelling evidence of this surging trend lies in Knowledge Bank's declaration of ‘regulated bridging' as the top searched criteria term in the first quarter of this year.
Distinguishing regulated from unregulated bridging extends beyond the obvious factor of FCA authorization (though this is pivotal).
It revolves around the purpose of the loan – unregulated loans secure against various property types, while regulated loans must be used for properties already owned by the borrower or their family or properties they intend to occupy in the future.
The current interest rate turmoil has wiped out nearly 1,000 mortgage products within weeks and hiked rates for the surviving ones, while the house price-to-average earnings ratio has soared to 8.8, double that of the 70s.
In these tumultuous times, buyers facing property chains are in an unenviable position. With mortgage products vanishing within 24 hours and loans slipping out of reach, relying on a property chain has become a nerve-wracking prospect.
Enter regulated bridging loans – a perfect panacea for numerous prospective buyers. These short-term loans can be arranged and extended swiftly, securing the property with the interest rolled-up and paid as a lump sum at the term's end.
And in case things move faster than anticipated, borrowers only pay for the months they held the loan, saving money with early repayment.
Apart from chain breaks, regulated bridging loans offer versatile applications.
Take, for instance, a recent case where a client aiming to downsize withdrew from their first intended purchase due to dry rot, got gazumped on the second choice, and later returned to the second property when the gazumper backed out.