Committed bridging borrowers face race against time

It’s no secret the stamp duty holiday has led to a sharp jump in interest in residential properties, with would-be homebuyers seeing the tax holiday as the opportunity they needed, whether to get onto the housing ladder for the first time or to take that step up the ladder.

The holiday has also provided a notable boost to the bridging market. We’ve seen no shortage of bridging clients who are keen to get their deals over the line ahead of the June stamp duty deadline. After all, the money saved on that tax bill can instead be put to use elsewhere, for example, covering the refurbishments needed before the property is let out or perhaps sold for a profit.

Feeling the pressure

Deadlines like this one do tend to spark a jump in investor activity. We saw it back in 2016 ahead of the introduction of the additional stamp duty rate for purchases of second and additional homes, when landlords wanted to move quickly to add to their portfolios before the new tax rate struck.

What’s made the situation slightly different this time is that it’s not just investors who are racing against the deadline, but residential buyers too. It means a heightened level of competition for every single property, as landlords battle against not only other investors but those who want to turn that desirable property into their own home.

This competition has focused the mind though and means we are seeing a real surge in committed buyers looking for bridging loans. These aren’t speculative buyers, essentially dipping their toes in to test the waters, unsure of whether they really want to go ahead.

No, these are buyers who are clear on what they want to achieve. They’ve identified the property they want to invest in, they know what money they have at their disposal to devote to the project, and they know all too well how quickly they need to move if they wish to get the deal over the line in time.

Getting creative

The nature of the market at the moment, with the level of frenzied activity we are seeing, means that cases which might normally be relatively straightforward can now be rather more complicated. The demand and competition is having a significant impact on purchase prices. Vendors are in a fantastic position, able to take a step back and let the interested parties drive up the price for quality properties.

However, those price increases can cause issues. The sheer speed of the jumps can mean the cash savings a landlord had set aside for a deposit is suddenly no longer sufficient, which means they need to adopt a fresh approach in order to land that desired deal.

It’s on occasions like this that working with a bridging specialist can really pay off. When it comes to bridging loans, there are few situations we haven’t seen before, and so are well placed to spot ways that a case which appears impossible can in fact be concluded, and ahead of the stamp duty deadline to boot.

We’ve had clients in this position recently, facing a sudden shortfall in their deposit. But by restructuring the case, bringing in their existing buy-to-lets, for example, we’ve found a way around the issue so that the required funds are in place and ready to go.

That expertise comes with experience. The bridging market is considered a specialist area with good reason, and by partnering with specialists means you can ensure your clients are given the best possible chance of completing their projects.

The stamp duty deadline is looming, and there will likely be a surge of activity again before the holiday ends entirely in September. So, it’s crucial for advisers to start work now on identifying partners within the bridging sector, who will deliver the same level of service as you do but can help them complete their purchases before those deadlines.