News

In our last blog on the current housing market, we discussed some of the reasons for the elongated sales process and some of the issues the market is facing. We have seen a marked increase in regulated bridging loan enquiries and short-term finance arrangements in response to the delays experienced in property purchases, refinances and sales.

Regulated Bridging Loan

A bridging loan does exactly what it says: it bridges the gap between where you are and where you want to be, in this specific scenario this means buying a new home. These loans are fully regulated by the Financial Conduct Authority (FCA), and are typically for a set 12 month term, albeit there are longer terms available for certain scenarios including HNW’s.

The demand for these financial arrangements are increasing because they allow clients to move quickly rather than wait for a sale to conclude. The requirement for such is varied but can include; being stuck in a chain or wanting to move into a new property before selling the current one, downsizing, gifting money to children today as part of a downsizing plan, buying the new property before the current home is ready for market, and many more. This is especially relevant when clients risk losing their dream property due to delays and the extended process as discussed in our last blog.

A bridging loan can be a lifeline for some, offering a quick funding option that not only prevents delays for the buyer but also helps keep the market moving. With an average move time of 5 to 6 months from agreement to selling a house, excluding the time on the market, many people face the best part of a year before reaching their goals.

How Bridging Loans Work

In this process, the loan is secured against a property or combination of properties, usually the borrower’s current home, although it can be the property they intend to live in. The Omega team undertakes full assessment, working with our partners, of the borrower’s ability to repay the loan and ensure any such facility recommended is always appropriate and represents suitable advice. Lenders want to see a clear exit strategy for repaying the loan, whether through the sale of a property, financing via a mortgage, or other agreed-upon method.

Increase in Short-Term and Development Exit Finance

We have seen the demand for wider short-term finance grow, whether required for refurbishment, conversions and ground-up developments. Bridging loans historically had a fixed 12 month term, however many are now available over 24 months, with other structured debts options available over a medium term basis of 12-60 months, specific to each scenario. We are receiving more enquiries for clients looking to re-bridge or arrange Development Exit finance where they have reached the end of their existing term but perhaps not the end of that specific project. We analyse the scenario in every case and discuss what options are available to meet their exact needs, specific focus on understanding why any delays had been incurred and that forming a large part of our underwriting assessment. When securing or recommending a facility, we always ensure the term is considered and allows client plans to be fulfilled, allowing a contingency period where appropriate.

CASE STUDY – Regulated Bridge used for conversion finance

Our clients had found a semi commercial property, formed of flats and offices, however the property was originally a Rectory, forming one single residential property. Our clients sought planning permission to convert the mixed use asset back into a single dwelling. We supported the purchase to allow them to undertake the works during the term of the loan, before this would then be refinanced back onto a residential mortgage by our introducing partner using the converted end value of the property for the long term finance. We were genuinely delighted to help our clients achieve what was their dream move and plans, and always nice to hear in return:

“We couldn’t have achieved what we wanted without Omega, thank you”.

Need help? Contact one of us today about a project.