highlight the growth in distressed sales highlight the growth in distressed sales


Ryneveld Van Der Horst, Financial Director,

Over the last few months there has been a marked increase in distressed sales. The reasons are obvious. The turbulence in the credit markets has led lenders to tighten their criteria, and with interest rates likely to rise people in general are not feeling particularly positive about the UK housing market. Result? Less sales are completing, houses are on the market for longer and interest rate rises are making it more difficult for stretched borrowers to maintain their payments.

This in turn, has led to some very astute investors buying these properties at a discount and then leasing the property back to the sellers, most often with options for them to ‘repurchase’ their properties at a later stage.

The benefits are mutual. The borrower gets rid of their mortgage worries, gets to stay in their home and the new buyer obtains an investment at a discount. To obtain the discount they have to be in a position to complete quickly. This is where bridging finance comes in. Firstly, we can complete a transaction within typically five days and secondly, bridgers lend on open market valuation, not just the purchase price. So even though we will not go over the 100 per cent of actual purchase price, the borrower has the ability to obtain more funding through a bridger than through the more traditional routes of the high street lenders.

To use an example: Open Market valuation: £100,000. Purchase price: £70,000

We would be able to lend 75 per cent of the open market valuation, as long as that amount is not higher than the purchase price. Using the numbers above, we would be able to lend £70,000 – typically within five days!

We are seeing quite a few of these types of transactions coming to us and expect the volumes to increase in the coming months.”

Leave a comment