Crystal

Why are we seeing more regulated bridging applications?




In the second quarter of 2018, regulated bridging lending hit its lowest level since 2015, accounting for 36.8% of transactions compared with the 43.7% recorded in the previous three months.

Thankfully the downward trend did not continue and in the first two quarters of this year the segment has stabilised at 38.3% from January to March and 37.5% from April to June.

At Crystal, we are definitely seeing signs of a further positive nature with an upturn in applications to refurbish properties prior to putting them on the market to achieve the highest return. So is this a general market movement or are we seeing more brokers dip their toes into the specialist world?

Case one

A customer is looking to buy a new property and sell their main residential home, so an application not only covers the purchase, but a further £200,000 to refurbish the current house, which will see its value increase from £1.1m to £1.5m.

Case two

A client takes out a bridging loan to complete £55,000 of internal works, including the kitchen and bathroom, before taking the property to market. The current value is £260,000; post-works it will be worth circa £380,000 and be far more desirable to purchasers.

Case three

A customer is looking to sell their mother’s home as she has moved in with the family. The house is currently worth £125,000, and £30,000 worth of modernisation will see it sell for closer to £200,000.

The maths is pretty basic in all of these examples, but they clearly demonstrate how a regulated bridging loan, in the hands of those who cannot be classed as developers, can see an individual or family maximise their financial position. So why are we seeing more applications here at Crystal?

Easy access

It’s far too early to say whether we are about to see a general market upturn in regulated bridging. Yes, it’s true that when the economy is tough, people are more driven to maximise value in whatever asset they own, but with so many external political factors at play, we all know anything could happen.

What I would like to believe is that all the years of broker education in the specialist sector is starting to pay off and, truth be told, this is one of the simplest ways to gain first-hand experience in the bridging sector.

A regulated bridging loan connects the divide between the regulated and non-regulated worlds and is the perfect way to start the journey to help more customers and earn more from those customers too.

Take the challenge

As I’ve said many times, specialist finance should be an essential part of a broker’s toolkit as it solves problems: adverse credit, chain break, multiple incomes, zero-hours contracts, rental, development etc. But most brokers will hear these phrases and it’s the end of the line.

I don’t expect many of you have had clients ask you for a bridging loan, or a higher-rate commercial mortgage, but they solve problems.

But, as a broker, I would challenge you to challenge the client next time they wish to discuss a house move. Can a bridging loan and a small delay during renovation works bring a return-on-investment of the property in question and, if so, isn’t it our duty to raise this as a possible avenue?

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