Why you need regulated bridging finance in your toolbox
Allan Kay is director and chief operating officer at Alternative Bridging Corporation
At the beginning of July, chancellor Rishi Sunak announced a Stamp Duty Land Tax (SDLT) holiday to help encourage more property transactions as a way of kickstarting the economy. It worked.
According to Rightmove, more than £37bn worth of property sales were agreed in July – the busiest month for home buying for 10 years, and an increase of £12bn on the value of sales in July 2019. Between 5 and 12 August, Rightmove says that sales rose by 60% compared to the same time the previous year, with the usual summer slowdown not materialising.
This surge in activity has been reflected in reports from other businesses including brokers, surveyors and estate agents. London agency Kinleigh Folkard & Hayward (KFH), recently said it had seen unprecedented demand since the SDLT threshold was raised to £500,000 in July, with an 80% increase in valuation requests and an 86% rise in new seller instructions compared to last year.
However, with the SDLT holiday due to end in March next year, the window of opportunity for buyers is shrinking. According to the Home Owners Alliance, it can take around six months to sell a property from listing to completion, with much of this time taken by the mortgage and conveyancing processes.
We already know that mortgage lenders are experiencing strain in their service levels as the rush of applications has been layered on top of reduced capacity to facilitate social distancing and increased scrutiny in the underwriting process. Consequently, it is a common dynamic of the current landscape for mortgage lenders to pull products or increase rates as a way of protecting their service levels.
This extra time in the process increases the likelihood of transactions not proceeding and broken chains and the delays are likely to mean that some buyers miss out on the stamp duty window.
This is a good example of where a regulated bridging loan could prove invaluable for you and your clients as a way of helping a transaction to proceed within the required timeframe. We often talk about the many uses of bridging for property investors, but this more traditional use for regulated bridging is still an important tool for brokers and will certain prove useful in the coming months.
So, if you have clients who are stuck in a chain and concerned about completing a transaction within a required timeframe, one approach to help tackle this is with regulated bridging to provide clients with access to flexible funding while they sell their property.