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Bridging could assist with rush to complete before new SDLT deadline

The extended stamp duty deadline is expected to galvanise additional interest in bridging, according to Vic Jannels, chief executive of The Association of Short Term Lenders.

The average time it takes to sell a property has now risen to 295 days, as outlined by GetAgent.

As a result, it is believed bridging will help to ease the pressure on mainstream lenders and allow people to complete transactions ahead of the extended deadline.

Jannels said: “There are likely to be customers, who were unable to meet the first deadline, who will look to bridging to help ensure they hit the next one.

“Generally, a number of the term mortgage lenders are running well behind on service, while most of bridging lenders are still able to move quickly as long as their clients deliver the obligatory documentation in a timely manner.”

Jannels went on to say that while there have been stories of the average time to reach a bridging completion increasing, he does not believe this should distract intermediaries from the fact that, bridging lending can complete in just a matter of days.

This is provided that supporting information is supplied upfront and valuations and conveyancing are lined up correctly.

Chris Oatway, also believes that due to the increased transaction levels, he expects more bridging finance to be required.

However, Oatway said: “I am not sure to what level this will be directly linked to the deadline date.

“If it looks like a transaction will take longer to complete, I think it is more likely that a purchaser will try to negotiate on the purchase price rather than switch their funding strategy to bridging finance due to the additional costs.”

Jannels went on to say that at the ASTL, they have worked together with other trade associations to call for a change to the hard deadline that was originally scheduled for 31 March.

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He added: “It has been clear for some time the number of transactions being processed through the system has put every business involved in the process under immense pressure and that many transactions would not hit the original deadline.”

The consequence of this would have been many transactions falling through and many customers liable to bigger tax bills than they had planned for.

Jannels outlined that the extension of the full relief until the end of June will be positive news for transactions currently in the system and the inclusion of partial relief until the end of September will prevent a significant cliff edge as we faced in March.

Although Jannels noted that the maximum potential saving drop from £15,000 to £2,500 at the start of July, therefore he outlined the risk of a second another rush to beat the deadline at the end of June.

Looking to the rising use of bridging, Oatway explained that there is a “buzz” within the market at the moment and transaction levels have begun to increase.

He said: “With a renewed appetite to lend and a positive outlook in regard to the economy and liquidity remains as high as ever, I can only see the industry going from strength to strength.

“Property will always be a great inflation hedge – as well as being free from capital gains tax – and so, with the overall increased desire for outside space, we continue to expect transaction levels to remain high for the year ahead.”

By Jake Carter

Source: Mortgage Introducer

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Thinking creatively when it comes to financing your next property purchase

Even amidst rumours of its demise, it is undeniable that the UK’s real estate sector is hugely attractive among both international and domestic investors.

Thanks to increasing prices and health yields, commercial and residential properties have remained popular ventures for those seeking safe and secure assets able to withstand sudden and volatile market shocks.

According to recent figures, strong market demand has pushed the average price of a UK home to £225,000, and property forecasters anticipate incremental increases over the coming 12 months despite a potential interest rate hike and uncertainty surrounding Brexit.

The competitive nature of the UK real estate market has, however, made it more challenging for prospective homebuyers seeking to move onto or up the property ladder.

Limited supply and rising demand have led to a rise in the number of property chains, in turn increasing the time it takes to complete a purchase and thereby meaning there is a greater risk of the deal falling through.

More and more deals are falling through

In Q1 2018, the number of house sales falling through before completion had reached 38.8% – this is up from 34.9% a year earlier and the highest recorded figure in over a decade.

Of these failed purchases, nearly half (46%) were due to a buyer changing their mind, or the seller becoming frustrated by the time it was taking to negotiate and exchange keys.

Understandably, the delays typically encountered when stuck in a property chain has become a source of frustration for prospective buyers, with the added repercussion that a collapsed chain can lead to thousands of pounds worth of solicitor, conveyancing and broker fees which ultimately amass to nothing.

With delayed chains affecting more buyers and sellers, there is a clear need for people to think more creatively when it comes to buying a property.

From the outset, a strategy is needed which takes into account the different scenarios that could arise, including a broken chain.

Indeed, people must consider unforeseen time delays ranging from the initial negotiation period right through to the days leading up to the completion of sale.

Moreover, it goes without saying that having access to the finance needed to commit to a purchase is of utmost importance.

The mortgage application and approval process can be time-consuming, made more complicated by the stringent lending measures that have been introduced in recent years.

Having a mortgage agreed in principle prior to a purchase is of course standard practice, but the ensuing background checks, mortgage affordability interviews or changes in earning as the property negotiations develop can lead to significant delays down the line.

As such, it is important that property buyers – particularly the more seasoned property investor who is far more active in this market – have a firm grasp of the options available to them if a mortgage is not viable.

Keeping your options open

Moving beyond the traditional finance instruments available to borrowers, alternative finance solutions such as specialist bridging loans can be ideally suited for those stuck in a chain.

Bridging loans are by their very nature a flexible and versatile solution, ensuring the rapid release of capital by using an existing property asset as a security.

The specific application varies according to the financial circumstances of each buyer, but in most cases, bridging loans ensure a buyer can purchase a property if there are delays in receiving the funds from a sale of an existing property or because another lender is unable to act quickly enough.

This type of creative thinking and willingness to look beyond traditional finance solutions has significant potential for those at risk of being stuck in chain.

Having access to capital places any buyer in a position of strength – it helps negotiations move more quickly and in turn reduces the risk of buyers getting locked in complicated chains or there being delays that result in a deal falling through.

Bridging loans will not be suitable for everyone, of course. Nevertheless, it remains important for those who are active in the UK’s property market to know the options available to them and understand how they can avoid some of the problems that are causing an increasing number of real estate deals to break down.

Source: Mortgage Introducer