The slowdown in the property market means it is now taking nearly twice as long to sell a home than it did last year. This is according to data released earlier this year that showed properties took an average of 49 days to sell in May, compared to 26 days in May 2022.
There is little surprise then that regulated bridging is in high demand, as more homebuyers with their hearts set on securing a property don’t want to risk waiting to sell their own home. Longer wait times can often lead to more broken chains and the latest Bridging Trends research by MT Finance found chain break bridging to be the most popular use of short-term finance, with regulated bridging being the second most searched criteria term.
In this environment, cash really is king. Cash buyers are highly sought after as they enable vendors to break the cycle of slow-moving chains. This means they can negotiate better deals and, with a regulated bridging loan, it gives you the opportunity to help your clients to secure their next home.
A bridging loan can release the equity from a buyer’s current property, which can then be utilised to speed up the whole process. This puts a purchaser in a much stronger negotiating position, enabling them to have a better chance of winning bids, commanding better prices, and being in a position to act and respond to the vendor’s needs as well as their own. The entire buying process is also made easier and gives the purchaser greater control of the transaction.
There are a number of considerations when using bridging finance in this way. In the first instance, by simultaneously owning 2 properties, additional Stamp Duty is payable upon purchase of a second property. This can be claimed back once a buyer is able to sell their current property, they will need to have these funds available to pay the increased Stamp Duty. A bridging loan could additionally be used to secure funds for these costs if the amount of equity available across the properties permit.
Some clients may be put off by the rates charged on bridging loans at first as these may seem high compared to a term mortgage. However, a regulated bridging loan is only taken for a maximum of 12 months and it could put a buyer in a powerful position to negotiate, enabling them to secure a discount on the property they are buying.
Another benefit is that a homebuyer who has taken a bridging loan rather than waiting to sell their property could potentially move into their new home at their leisure following completion. This allows time for any additional works to be completed prior to taking occupation and avoids that highly stressful moment on moving day when they have to juggle the completion of a sale and a purchase and not knowing when they will get the keys for their new home
