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.
Regulated bridging loans have gained significant traction in the broader residential market, particularly concerning chain breaks.
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.
We secured a loan exceeding £300,000 with Greenfield Mortgages against the client’s existing property, valued at £700,000, which was repaid from the property’s sale.
Another noteworthy case this year involved a client planning to purchase and renovate a farmhouse for personal residence.
We facilitated a £1.1 million regulated bridging loan over 12 months through MT Finance, securing it against both the client’s existing property and the farmhouse, with the eventual sale of the existing property funding the loan repayment.
The mortgage market and clients’ needs are becoming increasingly intricate and fluid, with no signs of reversal. Regulated bridging stands as a powerful tool for navigating uncertain situations.
The good news is that busy brokers, operating at the frontline, don’t need to familiarize themselves with all the details.
As a master broker with extensive experience in the bridging sector and deep connections with lenders, clients can be referred to us, ensuring they benefit from our expertise.
In doing so, brokers receive a referral fee for connecting clients, and in cases of repeat business, clients transacting with us further reinforce the benefits.
This is a win-win situation where everyone gains – the lender, all involved brokers, and most importantly, the clients. There has never been a more opportune time to dive into the regulated bridging sector.
Source: https://www.financialreporter.co.uk/blogs/regulated-bridging-an-ever-more-popular-solution-for-todays-complex-needs.html
