The first quarter of the year has taken off and the real estate market remains solid. With March figures showing property prices are still up 8% year on year, investors and developers will need the support of brokers to find opportunities between price increases.
Although the market is still booming, there will always be deals to be had for those who keep a close eye on investment opportunities.
So how can a broker deliver even more value to their clients while saving valuable lifecycle costs? With a well-structured rental bridge.
There is still a lack of real bridging mortgages
We have seen an increase in interest and requests for bridge mortgages from those who want a smooth transition between two specialist products. Developers and investors benefit from the seamless transition between two products, the time saved in the process, and the lower costs of combining two products and applications.
There is a trend for lenders in the transition space to diversify into buy-to-let (BTL) mortgages. This week, as of this writing, United Trust Bank announced the addition of a BTL division. But there is still a lack of real bridging mortgages.
There is certainly room for innovation to meet the growing demand for this comprehensive product.
This is due to several factors, including internal product segregation. In some cases, different financing lines can make it difficult to pre-subscribe the BTL with the bridge, but also the valuation risk and dependence if the project turnaround time is not fast, i.e. say three to six months.
Customers want guaranteed output. Having another underwriting, even if lighter, makes it less attractive and raises the question of whether the borrower is simply splitting the two parts between different lenders, if they don’t get that trust from the start.
There is certainly room for innovation to meet the growing demand for this universal product.
We see the tendency of homeowners buying to add value or converting to multi-occupancy homes for better returns, but not wanting to take the risk of the bridge without the exit being there. They are ultimately owners, not developers, so risk appetite is often lower.
Bridge lenders diversify into BTL mortgages
With the real estate market and demand for housing being as strong as it is, there is more pressure on homeowners to increase their returns and sometimes a bridging loan followed by a BTL mortgage just isn’t right for them.
Yet a conventional BTL mortgage will not work for the purchase, meaning the call for a smoother product offering with financial savings for the customer is more important than ever.
For lenders who have the ability to offer this product, it is ideal for customer retention and relationship building.
Lucy Barrett is Managing Director of Vantage Finance