Over the course of the past 18 months, high-value bridging applications have seen a notable rise. Once seen as a failing niche product with limited practical applications, the benefits of bridging loans are being embraced by more borrowers than ever before.
Following an extensive period spent on lockdown, the sector was flooded with inquiries and applications from businesses and private borrowers alike. Many of which had long since reached the conclusion that no conventional bank or lender could meet their requirements.
But what specifically are bridging loans being used for by this growing audience of borrowers? What are the most common applications for high-value bridging loans in the UK right now?
1) Finance for Residential Property Purchases
The UK’s real estate sector has been a hive of activity throughout much of the year. A major spike in demand for spacious homes outside the capital has driven average UK house prices to an all-time high. With year-on-year growth having exceeded 10% in most regions, the average cost of buying a home in the UK now stands at more than £250,000.
As demand continues to comfortably outstrip supply, buyers are finding innovative ways to beat rival bidders to the punch. One of which is to use fast-access bridging finance to purchase homes at short notice, subsequently repaying the balance in full when their current home is sold.
With the homeworking trend set to continue indefinitely, so too will demand for premium properties in desirable locations, with spacious interiors and private exterior recreation spaces.
2) Commercial Property Purchases
Savvy investors have been keeping a close eye on the commercial property sector, which more or less tanked during the height of the COVID-19 crisis. Millions of offices sat vacant for months on end, resulting in a major crash in commercial property prices in some regions.
Having (quite rightly) predicted an eventual return to normality, investors have been picking up commercial properties at comparatively low prices in the interim. Now that the sector is indeed bouncing back, those who made the right moves at the right times are reaping the benefits.
From office buildings to retail units to warehouses to mixed-used properties, bridging finance is a popular funding tool for commercial property purchases. Again, one that provides investors with the chance to take advantage of time-critical purchase opportunities.
3) BTL Property Portfolio Expansions
Lastly, potential savings of up to £15,000 by way of the temporary stamp duty holiday motivated many BTL investors to make their moves. Not to mention, skyrocketing average monthly rents across the UK and record demand for quality rental properties.
Research suggests that almost 40% of investors in the UK purchased at least one additional property while the stamp duty suspension was active. Elsewhere, polls have illustrated how around a third of all investors plan on further expanding their BTL portfolios within the next 12 months.
While the sector remains as buoyant as it is today, interest in fast-access, low-cost bridging loans for BTL portfolio expansions is likely to continue.