how bridging offers much-needed flexibility
Quarterly house price growth slowed to 1.2% in June according to Zoopla as sales momentum recovered over the first half of the year. While this modest rise is undoubtedly good news – and thanks to a consumer confidence boost – it does come with the caveat that H2 is set to be trickier, partly due to the jump we’ve seen in mortgage rates which have increased by over 1% and now average between 5% and 6%. Viewing 5% mortgage rates as a tipping point, Zoopla’s opinion is that annual house prices will fall in 2023 while sales volumes will also decrease.
The prospect of lower annual house prices will not be a shock to many, particularly considering the steady rise in the Bank of England base rate since December 2021 as inflation remains stubbornly high.
Other takeaways include 42% of sellers having to accept offers more than 5% below the asking price while more than one in six sellers are accepting discounts in excess of 10% below the asking price. This points to the second half of 2023 being a buyers’ market, a sentiment also shared by Zoopla. Their data shows that there were 14% less buyers in the market in the four weeks to the report’s publication on 28th June compared to the average over the last five years. Those that do remain appear committed, making some good news for sellers.
a challenging environment
For many borrowers, particularly landlords and investors, the current economic landscape continues to be challenging. This has been compounded by a raft of product withdrawals in recent months. As Moneyfacts observed earlier this spring, there was a 14% decrease in the amount of buy-to-let mortgages for new landlords between 22nd and 30th May. This is the latest episode in a trend exacerbated by the fallout from last year’s mini-Budget.
Some borrowers may not have felt the impact of rate rises yet but with think tank the Revolution Foundation noting that around 800,000 people are expected to remortgage next year, it seems likely that they will face an increase in their monthly repayments. In fact, the think tank has estimated they’ll be paying an average of £2,900 more annually. Despite this, Chancellor Jeremy Hunt has already ruled out any government help with mortgage costs, claiming that mortgage relief schemes would “make inflation worse, not better”.
a need for flexibility and stability
It’s important to note that it is not all doom and gloom though and borrowers still have options. As many high street banks and building societies remain cautious, some are instead seeking funds – including bridging loans – via specialist lenders. In the current climate, a bridging loan could be the perfect stopgap. With base rates yet to plateau, a bridging loan could give some much-needed breathing space to landlords and investors who are looking to either purchase a new property or refinance an existing asset. With terms available for up to 24 months, a bridging loan provides borrowers with a short-term fix as well as giving them the time to wait for a longer-term solution with more favourable rates.
Another scenario in which a bridge could help clients is when a borrower has come to the end of their fixed rate mortgage without remortgaging and automatically been moved onto a standard variable rate (SVR). Susceptible to changes without notice, they tend to rise when the Bank of England’s base rate does. According to figures released by UK Finance in mid-June, around 773,000 borrowers are on an SVR mortgage. For these borrowers, a bridging loan could give them structured and predictable monthly payments while they look for a better long-term rate.
how we can help
Here at MT Finance we have worked hard to create products which are as commercially-minded and flexible as possible. Each case is judged on its own merits and the borrower’s individual situation. It is this human-touch approach that we believe makes us stand out.
All our unregulated bridging loans are available between one and 24 months with no exit fees or early repayment charges. This allows borrowers to monitor the market and exit onto a longer-term product when rates have stabilised somewhat.
As many borrowers face increased costs, how interest is paid is a key consideration. Our clients have multiple options to choose from to make these payments, including serviced, retained or part and part. Each have their benefits. Serviceability allows those whose finances are in good shape to borrow more while retained interest means no monthly payments until the end of the loan. Part and part offers the best of both.