Alan Cleary

How to bridge those house buying bumps

I was struck by a statistic I read in the January snapshot from the Royal Institution of Chartered Surveyors (RICS) which said that it now takes 19.4 weeks, on average, to sell a property in the UK — the longest length of time since RICS started recording such information.

The report goes on to say that the UK housing market faces a challenging 2019 and is unlikely to see much change in the coming year, with a continuation of weakening sales activity. RICS predicts that as sales activity continues to flatline, house price growth will, in turn, falter. There are a number of reasons for this declining sales activity. For example, average housing stock levels are low, the ongoing Brexit shenanigans and concerns about prospective interest rate rises.

With all of this uncertainty, imagine if your customer has seen the perfect property, but it is stuck in the middle of a long and slow-moving chain. Buying and selling a property is stressful at the best of times, but that four-and-a-half month wait is going to feel even more tortuous while they’re desperately waiting for some movement in this sluggish market.

So what can you do for them? Tell them to cross their fingers, play the long game and hope that the property they’ve had their eye on is still available when there’s finally some movement in the chain? Or do you help them to take things into their own hands and get things moving?

It’s why I’m not surprised when I read that the bridging market grew by nearly 15% in 2018 compared with 2017, with members of the Association of Short Term Lenders writing more than £4bn of loans. There was a similar increase in the value of applications (nearly £21.5bn, up by 13.4% on 2017). Here at Precise Mortgages, we’ve also seen growth in our bridging business and this is where I think that reports of a slower residential market are right: stalled purchases and sales have created a bounce in the number of borrowers who need to access bridging finance to complete their move.

In this uncertain economic environment, a bridging loan could provide useful, flexible finance for a whole range of purposes, including breaking a property chain. They’re not the solution for everyone, and borrowers should always seek independent advice before taking one out, but if your customer is in danger of a sale falling through because of a chain break, or if they want to buy a new home while waiting for their current one to sell, they could provide a viable alternative.

By taking out a bridging loan, a customer can proceed with the purchase of their new home, even if a potential buyer of their current property has withdrawn.

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