Why are borrowers looking for large bridging loans?

Throughout 2021, MFS noticed an increase in demand for large bridging loans. In fact, research shows that last year saw a record high of house purchases over the £5 million mark since 2013. A large portion of the deals flooded in during the final months of the year. The total was 11 property sales shy of the 2013 record, with 522 sales in the £5m+ category confirmed during 2021.

Source: Prime Resi

What has caused this rising interest in high-end property?

How can bridging lenders prepare for this increasing need of big loans?

Rise in house prices

Over the past 12 months, house prices have surged and renal costs have continued to rise. The latest data from ONS shows that the average UK house price has increased by 10% in the 12 months leading up to November 2021. With so many buyers entering the market, this rise should comes as no surprise.

The stamp duty holiday became a catalyst the recent spark within the market.  It opened an opportunity for homeowners to invest in larger, more expensive property whilst paving the way for alternative finance to become widely accepted as a form of mainstream finance for property investment. This interest has fuelled a hunger for property, causing an unbalance between supply and demand, pushing house prices up even further.

Covid has also had a huge impact on the increase of large loans. Buyers’ initial response to the pandemic saw a rising increase in luxury countryside properties; such as impressive manor house. More recently, however, buyers are seemingly seeking city properties once again. According to Savills sales index for Q4, West London witnessed a surge in 6+ bedroom houses. Prime Central London (PCL) property prices may be affected however by the rise of Omicron., pushing their predicated forecast (+8%) further into 2022.

Source: Prime Resi

The top three English regions to witnesses the highest property increase by November 2021 were:

  1. South West – 12.9%
  2. East of England – 12.3%
  3. North West – 10.8%

Source: Office of National statistics

Construction and development demands

There has been a rise in construction, development, and renovation activity. In this market, individuals or businesses typically need larger loans to complete projects, with the properties then listed for sale or available to rent. With the ongoing housing shortage, new build properties have never been so important. Yet the unavailability of building materials continues to be a major problem for property developers.

Development exit finance is available for developers who are coming to the end of their building projects but need additional time to finish minor works or to find prospective buyers.  It is often a more affordable alternative to extending the original development finance.  You can find out more information on our development exit loan page.

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