Bridging market still offering ‘competitive’ options – SLS In Focus

This week several lenders have had to temporarily withdraw products and reprice as volatility in swap rates, the falling pound and base rate rises make pricing more challenging.

Some specialist lenders, like OSB Group, Together and Zephyr Homeloans, have briefly removed fixed rate deals.

However, recent volatility has not impacted bridging pricing in the same way and many competitive options remain.

Vic Jannels, chief executive of Association of Short-Term Lenders (ASTL), said whilst uncertainty was impacting availability in the mainstream mortgage market the association wanted to confirm that the bridging sector “continues to offer a full range of competitive short-term finance options for customers”.

He explained that short-term mortgage lending was funded in a different way to the term market, so recent volatility would have “relatively little impact on the sector”.

“The market continues to offer a full range of finance options and could prove particularly useful for homebuyers and movers who are currently facing a broken property chain for a variety of reasons including, for example, a mortgage product being pulled.

“It remains a particularly competitive and quick option for those selling and buying. Such as, for example, clients who might be downsizing and where an ongoing term mortgage is not required,” Jannels said.

‘Never select a provider purely based on cost’

Emma Jones, managing director at When The Bank Says No, said that bridging pricing was moving upwards from around 0.5 per cent and non-regulated bridging was “traditionally more expensive” than regulated.

Rob Peters, principal at Simple Fast Mortgages, said that pricing was dependent on “perceived risk of the deal and applicant, the loan-to-value (LTV) ratio, or sometimes length of loan required”.

He said for an inexperienced non-UK national wanting to do heavy refurbishment work, rates could range between 0.8 per cent and one per cent per month.

However, a UK buy-to-let investor using bridging to buy a property at auction could “expect a much lower interest rate”.

Peters continued: “Not all bridging providers were created equally and it’s important to get the right tool for the job. Never select a provider purely based on cost. Some providers are better for speed, and some better for specific client types, or projects such as renovations or developments.

“Bridging finance is usually an unregulated market which means it’s fairly easy to set up as a bridging provider, because of this it is important to work with a broker who knows which providers to use, and which to avoid.”

Morgan Bowker, mortgage advisor at Vincent Burch Mortgage Services, added that she didn’t expect bridging rates to stay as cheap as they are currently, as the overall cost of borrowing had risen quickly over the last few months.

‘Get in and get out…as quickly as possible’

Jones said that those considering bridging should speak to a specialist mortgage broker who had access to the whole of the market. She also recommended speaking to advisors who had direct access to lenders rather than an intermediary to “ensure a speedy process”

“Third-party involvement can only slow things down. Bridging should be fast. Using the right solicitor to transact the deal is key, as the common issue within bridging at the moment is the delays once it hits the legal stage,” she explained.

Bowker noted: “If you are looking for a bridge, my advice would be to get in and out, and as quickly as possible. Have your trades lined up ready for completion day and also have your exit mortgage lined up as well so you can exit out extremely quickly and keep your profits as high as possible.”