Though the stamp duty holiday has kept the mortgage market buoyant, there is a significant backlog which is affecting many in the mortgage market. It has been widely reported that the demand for mortgages is rising, yet extra underwriting measures have been put in place and many companies are working at a reduced capacity due to the pandemic. Borrowers are facing hurdles trying to obtain the necessary finance and many major banks and building societies have drawn back from the mainstream mortgage market. In this environment, first-time buyers and buy-to-let landlords have found their options dwindling.
The bridging sector has provided an alternative way to obtain funds for property purchases. Many lenders in this sector have added to their product ranges recently, increasing loan sizes and maximum LTV ratios. Borrowers have found it easier to use these products if they have been rejected by traditional lenders or had difficulty obtaining approval. MT Finance’s industry data found that interest rates in the bridging sector had fallen to 0.78% after a peak of 0.85% earlier in the year.
Hope Capital Chief Executive Jonathan Sealey says: “In the current climate whereby the mainstream market has tightened criteria and is starting to experience backlogs in conveyancing and valuations, bridging loans are now very much a product of first choice.”
MT Finance Director Joshua Elash says the growth in residential users makes it even more important for lenders to ensure that customers have a viable strategy for repayment.
“We need to be ever aware of the world around us,” he says. “A significant percentage of the exit strategies for our loans will be directly and/or indirectly reliant on mainstream funding in due course.”
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Bridge-to-let has been found to be an efficient and flexible option in a market currently under strain.