Home ownership in the UK has fallen to its lowest level since the early 1990s as soaring property prices have seen the number of people renting increase significantly. So it was no surprise that in the lead up to the General Election housing was a key issue, with all the major parties agreeing there is an affordable housing supply crisis in the UK and offering various solutions on how to solve it.
As we know, the Conservatives emerged triumphant after achieving an unexpected majority - but one of Government’s key challenges now the dust has settled on the election will be successfully delivering the promises outlined in their housing bill. For example, they’ve set an ambitious target of doubling the number of first-time buyers by 2020, which will be no mean feat. Furthermore, a key manifesto pledge was to extend Margaret Thatcher’s Right to Buy scheme to 1.3m families – and this was confirmed at the Queen’s Speech – but it will be a struggle to ensure this policy is affordable.
The housing bill, along with the stability of the election result, will no doubt boost the housing market as it will provide the reassurances many sellers and buyers felt were lacking in the build up to the election. Indeed we’ve already seen an uptick in demand for London properties, although this is largely confined to the capital’s high-end property market.
With pent-up demand likely to ignite a flurry of activity in the next few months, the complexity of renewed competition, increasing house prices and increased regulation will mean that buyers will be in need of more support than ever in gaining access to competitive finance.
Given the ambitious housing targets that need to be met, bridging finance is a viable option for developers and refurbishers that struggle to obtain the finance they need from high street banks. It provides the short-term finance they need to kick projects off, to reintroduce previously uninhabitable properties to the housing stock and can also help individuals complete property purchases quickly to secure their dream homes in certain circumstances, such as buying at auction or if property chains break down.
The latest West One Loans Bridging Index shows that there is a growing awareness amongst borrowers of the possibilities of bridging loans – West One added £50m to its loan book having completed more than £80m worth of loans in the first quarter alone.
This trend is likely to continue amid increased housing demand and supply. In recent years high street banks have been regularly criticised by property developers for failing to meet their needs – they do not always provide the right kind of finance in the time required. While mainstream lenders get nervous as incomes struggle to keep pace with house prices, bridging lenders have a desire to do deals, which has the knock-on effect of boosting the economy.
So the future for the bridging loans market has a positive outlook – political stability, a buoyant housing market, and a reluctance among high street banks to lend will all contribute to making bridging loans an attractive alternative source of finance.
Duncan Kreeger is Director of West One Loans
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