People are turning to bridging to assist with quick transactions
“There are two types of bridging customers, regulated and non-regulated, which translates into vanilla and niche consumers,” according to Jim Baker, sales director of bridging at Spring Finance.
“Some are very competitive with rates, however, will only cater for the most straightforward cases, whereas you also have more specialist lenders out there,” he claimed.
He believes that the vanilla side of the market only want the easy cases, whereas others seek more complex customers and thrive with manual underwriting.
Why has bridging become so important?
Similar to the financial issues commonly associated with the self-employed, many full-time employees are struggling at the moment with financial stability.
As a result of the pandemic, a lot of employees across the country were let go from their jobs, or were placed on furlough for an extended period of time, which meant that their affordability was in a poor position.
On top of this, UK house prices rose at the fastest annual pace since 2004 in March, with prices jumping 14.3% from a year earlier, taking the average value to a record £265,312, data from Nationwide shows.
Read more: Nationwide – UK house prices in biggest jump since 2004
According to Baker, this was fuelled by the stamp duty holiday which removed the tax required on properties below £500,000 during the height of the pandemic.
The taxation costs and moving costs associated with buying and selling are putting many people off, according to Baker, and he went on to say that he has seen people looking to extend their existing properties to avoid the upheaval and costs associated with moving home. As a result, people have turned to bridging to accommodate this as it can provide quick and easy finance.
Why are some cases more complex?
Specialist underwriting is needed in many cases as the customers are more complex because of the financial situation in the market, Baker outlined.
From a broker’s point of view, Baker said that it is all about placing the customer correctly with a lender who is most likely to approve the deal.
“In the bridging market it is easy to be the cheapest, but it is the decision-making process which is more important,” he said.
Baker has also seen an increase in the use of bridging from landlords who are seeking to improve the EPC rating of their rental properties.
A consultation by the government has proposed raising the minimum EER for private landlords to C, up from E, applying to new tenancies from 2025 and existing tenancies from 2028.
Read more: Landlords well informed of EPC changes
However, improving a property’s EPC rating can be an expensive and a timely job, with some cases requiring the property to be in vacant position in order to complete the work.
“Bridging finance can allow for landlords to invest in their properties and improve the EPC ratings so they can continue to let them out,” said Baker. He went on to say that the bridging market is very broad and flexible, which allows it to cater to many different clients with different needs.
However, while he stated that the market had moved away from the ‘cowboy finance’ image it once had, due to many unregulated bridgers, the market is still viewed as risky and it is important to pick your lender carefully.
