Well, you might think that would be good news for the mortgage broker who can take a stab at arranging the necessary funding. But in a highly competitive market, it puts the buyer at a huge disadvantage. When it comes to desirable properties, UK buyers must compete with international purchasers who may well have the cash to put down – and plenty of it.
Yet there is a potential solution. In my last blog I discussed how invaluable bridging finance could be when buying at auction. Developers who don’t want, or are not able to buy for cash, are using bridging finance to secure a property at auction, do the renovation work required and then refinance onto traditional, longer-term finance.
But it’s not just at auction that bridging finance is proving useful. We are working on several deals in London where the buyer needs to be chain-free in order to secure a property. This effectively means being a cash buyer, as it is not easy to tie in a sale and a purchase at the same time. Too much can go wrong when time is in short supply.
If the client does have to sell their existing property before they are in a position to buy the home of their dreams, they are likely to miss out. However, if they don’t have the cash to spare – and frankly, who does these days? – the alternative is to arrange a larger facility across both properties, which is reduced upon the sale of the existing home.
This has a number of advantages. It gives the client cash-buyer status, enabling them to secure the property they want without rushing the sale of their existing home. This gives them time to find a buyer and sell at the best price. They can spend a bit of money achieving the ‘wow’ factor because there will be money available to do this.
Even better, rather than paying the normal bridging rate, borrowing may be possible on a bespoke basis for the right sort of client. There might be a higher fee than on regular residential lending but there tend to be no penalties to exit, giving the client 12 or 18 months to sell their property.
It means there is no panic, it takes off the heat and gives the vendor control. And in these uncertain times, who doesn’t want a bit of that?
Mark Harris is chief executive of SPF Private Clients
