How bridging finance can support the demand for refurbishment and renovation

Gone are the days when bridging finance was used solely for speed. Indeed, many a B&C article and webinar this year highlighted the wide range of other uses for this more specialist type of finance.

One such use is for property renovation and refurbishment and, in a post-pandemic world, the need for this looks set to increase. 

The pandemic has changed the lives and routines of many people in the UK. Lots of companies have adopted a hybrid way of working with employees spending part of the week at home and the rest in the office. The long period of lockdown and furlough for many meant we spent a lot more time at home than we would ordinarily have done. This has given us the chance to look at how we are using our homes and whether we could make changes to them to result in a better way of living and improved sense of wellbeing, such as creating more open-plan living space, improving our cooking and dining areas, or creating a home office. The rise in popularity of a home workout with Peloton bikes and Joe Wicks and others will also have undoubtedly led to more people to consider creating some form of home gym area.

Some families who have been separated for long periods of time have also looked at increasing the size of their homes by extending or converting their loft space to be able to accommodate their relatives or create space for families that have increased during the pandemic. In addition, those who have opted to move out of claustrophobic cities in favour of more green space may have opted to buy dated homes which require extending and bringing up to a modern standard. 

ONS data reveals that the level of construction output and new work in September 2021 was 1% and 3.5% below pre-pandemic levels, respectively. However, repair and maintenance work was 3.9% above pre-pandemic levels.

Government data shows there was a 45% year-on-year increase in the number of planning applications received during Q2 2021. And it’s not just homeowners who are wanting to make changes to properties they own, investors are looking at ways to meet the changing needs of the rental population and maximise their returns. This, coupled with the government’s proposal to enforce a compulsory energy performance certificate rating of ‘C’ on new tenancies by December 2025, means that the demand for refurbishment and renovation looks set to increase.

Many bridging lenders offer a renovation or refurbishment product, with most splitting this in to two categories: light and heavy. Light refurbishment typically consists of cosmetic, non-structural works, while heavy refurbishment usually involves structural work, often requiring planning permission for extensions and loft conversions. There will be differing requirements for each type of loan but, provided the lender is confident that the works can be done in the loan term and there is a viable exit, bridging can offer a great source of funding. 

One of the benefits to a customer of using a bridging loan for these projects is when the works will increase the end value of the property. They will be able to benefit from a lower LTV and therefore cheaper long-term mortgage once the works are complete.

With tradespeople booked up for months on end and people continuing to strive to make improvements in their lives through their homes or investment returns, it looks like the specialist finance market could assist in enabling them to move forward and make the changes that they want.

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