The housing market is nothing but resilient. Despite higher interest rates and the prospect of double-digit inflation, property prices continue to rise – albeit at a slowing rate. According to the latest official figures from the Office of National Statistics, house prices were up 9.8 per cent in the year to March compared to the 11.3 per cent annual rise recorded in February.1
There is high demand from a large number of buyers chasing a few properties. Homes are selling faster than ever before, taking on average 33 days to sell rather than 67 in 2019.2 This intense competition may be deterring some owners from putting their homes up for sale.
Reports from estate agents on the ground suggest there is an increasing number of cash buyers and a growing number using bridging loans. Indeed, around a quarter of buyers using bridging loans to purchase a property are those looking to fund a ‘chain break’. In other words, they are wanting to buy a property before they sell an existing home.3
What is a bridging loan?
Bridging loans can prove a useful tool for people looking for a temporary solution to their funding needs. Not only are they used for chain breaks, but they are also commonly used for investment property purposes. Previously, these loans have often been an expensive solution to a tantalising problem. However, at Weatherbys, our short-term loans are no more expensive than our longer-term facilities and we work with you to tailor the loan that’s right for you without imposing punitive or unfair terms. And age is no barrier.
Homeowners, including those aged over 70, can obtain a bridging loan with interest charged at 2.59% per annum plus the Bank of England base rate – giving a current cost of 3.59% per annum – with a 1% arrangement fee.
Bridging loans can also prove advantageous for owners of valuable homes who intend to release substantial sums – and where professional investment and wealth advice will be needed in any event. There is a short-term finance option which is even more competitively priced for borrowers who sign up for the Weatherbys Investment and Wealth Advice service with at least £500k of the surplus proceeds from the eventual sale of their existing home.
Using a bridging loan to downsize
With house prices standing at record highs, it could leave many homeowners who are thinking of downsizing sitting on substantial but unrealised gains. Again, bridging loans could be a solution.
For example, for many older homeowners wishing to move, the immediate problem is how to unlock the wealth they have accumulated in bricks and mortar at the price they want or expect. This is where bridging loans can help them to span that gap and buy the property they want to enjoy in retirement.
Bridging loans are only a temporary solution – usually lasting less than 12 months – and are certainly not for everyone, but in challenging market conditions, and with the right advice, they can prove to be a flexible and useful solution.
How Weatherbys can help with your borrowing needs
We can help you with all your borrowing needs – whether for you, your children, or your grandchildren. We specialise in arranging short- to medium-term mortgages and loans secured against residential property, spanning owner-occupied and buy-to-let property.
We look at all aspects of your financial life, at all stages of your life. Rather than relying on the rigidity of credit scoring, we look at the full picture of your finances to make a pragmatic, informed decision. We give equal consideration to all our mortgage and loan applicants (over 18 years old) regardless of your residency status or whether you hold investments with us. Unlike many lenders, we will consider applications from borrowers over the age of 70 and take assets into account such as investments, guarantees or land.
When you apply for a mortgage or loan with us, in addition to personal attention from our Private Banking team, you can expect:
- a quick decision on your application
- stress-free arrangement from start to finish
- easy access to the people who make the decisions
- clear, simple communication to keep you up to date
- us to work directly with surveyors and lawyers on your behalf
Sources:
1 ONS, 2 Rightmove, 3 Bridging Trends
Important information:
Your home may be repossessed if you do not keep up repayments on a mortgage or any debt secured against it.
Borrowing money against your investment portfolio has its risks and is not suitable for everyone. If the market value of your pledged securities declines below required levels, you may be required to pay down your loan or pledge additional eligible securities in order to maintain it, or we may require the sale of some or all of your pledged securities. The sale of your pledged securities may cause you to suffer adverse tax consequences. We recommend you consult your independent financial adviser or your Weatherbys Investment Manager before applying for lending against an investment portfolio.
Our mortgages and loans are subject to underwriting and criteria. You must be 18 years or over to apply for a mortgage or other loan secured on your property. Terms and conditions apply.