Demand for bridging loans remains high even after SDLT holiday deadline

The UK’s property market continues to defy expectations as we move firmly into the latter half of the year. The first reduction of the stamp duty holiday has passed. Excitingly, interest among homebuyers and demand for bridging loans for property investments remains as high as ever.

The first half of the year saw rapid growth in house prices amid a flurry of buyer activity. According to Rightmove, the first six months of the year were its busiest in 20 years. As a result, the average listing price of homes in England, Wales and Scotland reached £338,447 in June 2021. This is an increase of £21,389 (6.7%) since January.

Source: The Guardian

Some had predicted that when the first stamp duty holiday deadline passed on 30 June, the market would suddenly deflate. However, Rightmove said when announcing its latest data, that “high activity levels were continuing despite the deadline now passing”.

Demand for bridging loans remains high

Here at MFS, we have seen no let-up in the number of bridging loan enquiries we’re receiving from brokers and private clients.

Clearly, there are many investors who began the hunt for their next property during the stamp duty holiday, and who still intend to proceed with this even if the scheme has begun to taper down. There are of course, still tax savings on offer until 1 October, which will incentivise many buyers and sellers to act.

Indeed, separate figures released by Rightmove estimated that there were 704,000 sales going through the conveyancing process at the end of June. The deals will still move towards completion, and demand for fast bridging finance will stay high as a result.

Source: Homebuilding.co.uk

Reliability is everything

With the property market a hive of activity, there remains a bottleneck of transactions that need clearing. The importance to buyers of finding a reliable lender is greater than ever.

We have worked with numerous clients over recent months whose lenders have let them down.

By pulling away finance the borrower believed they would receive, unreliable lenders have put their clients purchases at risk of falling through. There have also been issues with delays for buyers applying for mortgages. With the uptick in demand remaining over the past 12 months, some traditional lenders remain overwhelmed.

Source: The Times

It is unsurprising, therefore, that the bridging sector has seen an increase in demand over the same period. According to the Association of Short-Term Lenders (ASTL), there was a 25.7% rise in bridging loan applications in Q3 2020 when compared to a year earlier. This increased even more sharply in Q4 2020, with 39.1% more applications versus the same three months of 2019.

Source: ASTL

From our experience, buyers in the current market are seeking two qualities from lenders:

  • Speed
  • Reliability

With the stamp duty holiday still in play, there remains a need to ensure there are no undue delays in securing finance. This much is logical.

 

However, reliability is a trait that’s often overlooked in the search for a bridging loan provider, in return for advertised ‘cheap’ rates. As a result:

  • Deals continue to fall through as loans are not being issued as agreed
  • There are more reports of lenders increasing rates mid-loan term

Property buyers need a lender they can trust.

What have we done?

We have taken numerous steps this year to ensure we can serve our clients with the same speed and quality we’ve always offered. Even if demand does continue to rise, we will work hard to ensure our clients receive the same standard of service. For example, since January we have secured three new funding lines. Together, these are worth a total of £400 million. What’s more, we now have 40% more staff than we did at the start of the year.

These developments have ensured we are prepared to handle the increased demand for bridging loans. Most importantly, it means that when we say yes, we mean it – with no hidden fees along the way.

To find out how we can support your property investments in the months to come, get in touch today.

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