0116 402 7982
News
Dilapidated Family Home in London Sells for £6.25 Million
Demand for spacious family homes in North West London apparently knows no bounds, with a large uninhabitable property having sold this week for £500,000 more than its asking price.
Three families with their sights on the home in St. John’s Wood entered into a bidding war, ultimately resulting in the dilapidated property selling for a huge £6.25 million.An impressive price in its own right, made all the more remarkable by the questionable condition of the property and its surroundings.
Speaking on behalf of Arlington Residential estate agents, Marc Schneiderman said that the price the property fetched represented further evidence of pent-up demand being unleashed on the housing market in the wake of three consecutive lockdowns.
“The appetite for family houses in North West London is often underestimated by people who feel that the events of the past 12 months have suppressed the sales market,” he said.
“This really could not be further from the truth, with demand currently far outstripping the availability of houses for sale.”
Mr. Schneiderman also stated that bidding wars between two or more buyers have occurred in at least 70% of his agency’s property sales over the past six months.
An ambitious renovation project
The property itself is currently in an uninhabitable condition throughout, though it has remarkable potential as a long-term renovation project.
Located in a desirable corner of St. John’s Wood, the distinctive detached property provides 7,074 square feet of living space, including eight bedrooms, seven reception rooms, six bathrooms, an artist’s studio, and a family kitchen.
According to Arlington Residential, each of the families bidding for the property is local to the St. John’s Wood area and intended to purchase the property for private occupation, not to renovate and resell.
The estate agent also emphasised the growing popularity of the local residential marketplace in and around St. John’s Wood, which is among London’s most active real estate markets for larger detached and semi-detached houses with private gardens.
A major shift in priorities among movers and first-time buyers during the COVID-19 crisis has seen attention move away from compact urban dwellings towards larger homes in less populated corners of the capital.
Private parking, space for home work, and outdoor living spaces are prioritised by more homebuyers than ever before, reflecting the new trend of working from home and spending more time at home than ever before.
Slight Slowdown in House Price Growth in March
Nationwide’s latest house price index indicates a small slowdown in annual house price growth for March, reflecting a temporary drop in demand in the run-up to the original stamp duty holiday deadline. Annual house price growth was 6.9% in February, slowing slightly to 5.7% in March.
Northern Ireland was the strongest performer in the UK throughout the first months of the year, achieving annual house price growth of 7.4%. Scotland and Wales saw growth of 6.9% and 7.2%, respectively, followed by England with Q1 annual price growth of 6.4%. This is down slightly from the 6.9% recorded in Q4 2020, which came as little surprise to the vast majority of market watchers.
The figures from Nationwide also highlighted a series of regional disparities, with the Northwest having achieved the strongest annual house price growth of 8.2%. As predicted by many, London’s performance was the poorest of all in the regional rankings, with annual price growth falling from 6.2% in Q4 2020 to 4.8% in Q1 this year.
A buoyant six months ahead
Commenting on the figures, Nationwide’s chief economist said that the slowdown was to be expected and that the sector is anticipating a strong spring and summer season.
“Given that the wider economy and the labour market have performed better than expected in recent months, the slowdown in March probably reflects a softening of demand ahead of the original end of the stamp duty holiday before the Chancellor announced the extension in the Budget,” Robert Gardner said.
“Recent signs of economic resilience and the stimulus measures announced in the Budget, including the extension of the furlough scheme and the stamp duty holiday, as well as the introduction of a mortgage guarantee scheme, suggest that housing market activity is likely to remain buoyant over the next six months.”
“The longer-term outlook remains highly uncertain. It may be that the recovery continues to gather momentum and that shifts in housing demand resulting from the pandemic continue to lift the market. However, if the labour market weakens towards the end of the year as policy support is withdrawn, as most analysts expect, then activity is likely to slow nearer the end of 2021, perhaps sharply.”
His sentiments were echoed by SPI Capital chief executive Anna Clare Harper, who suggested that many current home buying trends are likely to perpetuate throughout the year.
“This slight slowdown reflects the originally proposed end to the temporary stamp duty reduction and practical restrictions: Christmas, then lockdown, which reduced people’s ability to transact. Yet people want to buy while stamp duty is reduced,” Ms. Harper said.
“Stamp duty has a more than proportionate impact on transactions because affordability is heavily influenced by mortgage lending. Investors and homebuyers can borrow against the property price, but they cannot use finance to fund transaction costs.”
“Reduced stamp duty has not been the only driver of house price growth over the last year. We also have cheap debt as a result of very low interest rates, which give buyers a ‘discount’; the release of pent-up supply and demand and the desire to improve surroundings amongst existing homeowners; and the ‘flight to safety’, since in times of uncertainty, people want to put their money in a stable asset with low volatility. These trends are likely to hold up throughout 2021.”
These Are the Financial Terms That Confuse Most Brits
From brokers to banks and everything in between, those who work in the financial sector tend to be pretty savvy with sector-specific jargon. With the public, it is often an entirely different story.
More consumers than ever before are taking an active interest in their finances, but they often admit that a lack of specialist industry knowledge can be daunting.
For the benefit of those within the sector, Uswitch recently conducted a survey involving just under 4,000 Brits. Their aim was to find out which financial terms are most confusing for the average UK citizen, which brought to light some interesting findings.
The following may therefore prove useful for brokers and financial service providers, who are likely to encounter customers unfamiliar with this terminology.
‘Blended finance’ and ‘cornerstone investment’ top the table
Right at the top of the rankings in terms of lack of understanding, the survey from Uswitch found that just 4% of people were familiar with the terms ‘Blended Finance’ and ‘Cornerstone Investment’. The rest had no idea what either referred to.
Next on the list came’social enterprise’ and ‘Fintech’, both of which were recognised and at least partially understood by 13% of respondents. The lack of understanding with ‘Fintech’ in particular proved interesting, given how ‘Financial Technology’ refers to various everyday consumer staples like mobile banking.
While bridging finance activity in the UK may be hovering at an all-time high, just 14% of respondents were familiar with the term ‘bridging loan’ and the fundamentals of how bridging finance works.
Slightly further down the list came ‘CHAPS’ and ‘Hedge fund’, both of which were familiar to around 18% of respondents, while ‘annuity’ followed closely behind, with 20% of people saying they know what it refers to and how annuities work.
Despite the fact that most of those taking part in the survey are likely to have savings accounts, only 23% knew that ‘AER’ refers to and means the ‘Annual Equivalent Rate’ applicable to a savings account.
This was followed in the rankings by ‘Equity Loan’, understood by just 27% of respondents.
The most widely recognised and understood financial terms
At the opposite end of the table, the Uswitch survey also revealed which financial terms are most widely understood by the British public.
At the top of the rankings was ‘Pension’ with a score of 78%, though this suggests that a worrying 22% of Brits do not understand what a pension is or how it works. ‘Interest rates’ followed closely with 76%, though again, this suggests that 24% of respondents are unfamiliar with what interest rates are.
An impressive 73% of respondents were familiar with ‘Crowdfunding’, which has become a popular activity for funding innovative projects over the last few years. 71% of respondents understood the term ‘credit score’ and its meaning, while 68% were familiar with what an ‘ISA’ is.
Slightly further down the rankings, ‘Investing’ achieved a score of 64%, followed by ‘Stock’ at 61%. ‘Net worth’ was also a relatively widely understood term, with a score of 59% in the survey, followed by’repossession’ with 56% and ‘depreciation’ with 55% of respondents.
The report from Uswitch also revealed that the most commonly searched-for financial term online (by monthly average) was ‘stamp duty’, with around 7,300 people per month using the search term ‘what is stamp duty?”
2020s Most Important Bridging Finance Trends
Bottom Line: The bridging sector saw a combined fall in lending of £278 million last year, but evidence suggests the market is bouncing back from the impact of three consecutive lockdowns.
Collective bridging transaction completions were down by £278 million last year.
The average LTV on bridging loan issues decreased to 50%.
Bridging loan interest rates fell to historic lows during the fourth quarter.
Regulated and unregulated loans occupied an equal share of the market.
The most common application for bridging finance in Q4 was chain breaking.
The economic fallout attributed to the first two national lockdowns had a major impact on the bridging finance sector last year. As a result, total transactions for 2020 were down by approximately 38% from the previous year, to £455 million compared to £732.7 million in 2019.
Decreases in bridging finance activity were particularly prominent during the first six months of 2020, when the UK’s real estate market was temporarily shut down in its entirety. In the first quarter, bridging loans valued at a total of just under £113 million were issued. By the end of Q2, this had plummeted to just £79.4 million as lockdown restrictions took effect.
However, reassuring signs of improvement were noted during the closing six months of the year. Total bridging finance activity in Q3 came out at £115.52 million, increasing further to £137.22 million in the fourth quarter.
The latest figures released by Bridging Trends highlight a series of key findings for 2020. Bucking the trend of previous years, there was almost no difference in the share of the market occupied by regulated and unregulated transactions in 2020. Regulated transactions accounted for 36% of the market in 2018 and 39% in 2019, last year climbing to an impressive 49.4%.
Average monthly interest rates also fell to record lows during Q4, averaging just 0.72%. This is more than a full percentage point lower than the 0.85% peak recorded in Q2, which was followed by a fall to 0.78% in the third quarter.
Evidence suggests that bridging finance specialists are continuing to distance themselves from high LTV products, with the average LTV on a bridging loan last year coming out at 50.7%, significantly lower than the 52.9% and 54.6% of 2019 and 2018, respectively. The lowest average LTV of all was recorded in Q2 at the height of lockdown, 48.8%.
23% of the bridging loans issued in 2020 were second-charge loans, presenting a sizeable uptick of 20% from the year before. Q2 in particular saw a major spike in second-charge bridging transactions, an all-time record high of 26.1%.
Primary applications for bridging loans changed little from previous years, with funding investment purchases once again topping the table for the year as a whole, accounting for 22% of all transactions. Interestingly, chain break overtook investment purchases in the fourth quarter, accounting for a full 23% of all bridging loans. Bridging finance for business purposes came out with an annual market share of 11%; heavy refurbishment also accounted for 11% of all transactions last year and 12% of the bridging loans we used for regulated refinance purposes.
On average, bridging loan completions took 50 days in 2020, slightly longer than the 47-day average in 2019.
The average loan term in 2020 was 12 months, the same as in 2019. The average completion time averaged 50 days, up from 47 days in 2019 and 45 days in 2018.
Gareth Lewis, commercial director at MT Finance, comments:
“After the first lockdown, we saw the re-emergence of some larger lenders, and if you combine this with the stamp duty changes, it is no surprise that there was a stimulus on rates and regulated bridging in the latter part of the year.”
“As the vaccine rolls out and we gradually emerge from this lockdown, I believe we will see a new transactional flow from renewed confidence in the economy and businesses re-establishing themselves.”
Dale Jannels, managing director at Impact Specialist Finance, comments:
“The impact of the pandemic on the bridging sector is shown clearly in Q4’s data, but it also alludes to the activity we are now experiencing, some of which, but not all, is related to the Stamp Duty Holiday deadline.”
“It’s clear though that bridging finance is becoming better understood by the wider broker market (not just those in the specialist sector), and there is more confidence about the options it can provide customers, which should mean that 2021 could see a real watershed moment for this type of finance.”
Kevin Blount, head of operations at Clever Lending, comments:
“We certainly had an increase in inquiries during Q2, which led to a spike in new business submitted to lenders in Q4. We are working hard with lenders to find solutions, who in turn are reviewing their criteria and interest rates to fit the current market.”
“The SDLT holiday helped to bring business to the bridging market, which is continuing into 2021.”
Chris Whitney, head of specialist lending at Enness, comments:
“I am actually quite surprised that the fall in lending quantum in 2020 was so large. The market has always ‘felt busy’ and Enness did not see such a big drop in lending volumes.”
“Yes, we did see some big names close their doors as the whole country was forced to work out their strategies in the face of the pandemic on a micro and macro scale, but some still aren’t back as they were. However, I think most of the short-term lending market either carried on throughout or paused only temporarily as working practices were refined and made fit for purpose under the restrictions we faced, as well as the level of uncertainty that still hangs over us.”
“The absence of some big names has reduced supply, coupled with some restricting LTVs, which has had a marked impact on lending levels. I think this is also reflected in the fall in average LTVs over the year.”
“However, as the trend in Q3 and Q4 indicated, I think we will see volumes bounce back quite quickly, and with people re-entering the market, the data is reflecting the stiff competition lenders face for business in terms of lower interest rates.”
“There are some big high-street names who see themselves as ‘business banks’ but I know from first-hand experience that many did not step up to the challenge and support their customers as they should at this time. Borrowers were turned away or faced a huge amount of red tape to navigate on their own, not being able to get the support they needed so badly in a timely manner.”
“I think this is reflected in the increase in second-charge loans and the increase in regulated loans as well. The mainstream high-street lenders made it very hard to increase current loans, and if they did, it was taking much longer than normal. Consequently, I think that is why we see ‘chain breaking’ high on the list for uses of bridge loans. Lots of borrowers use bridge loans as an essential tool on a regular basis, but I think we have seen an increase in new to the sector borrowers, which has contributed to a shift in some of the historic dynamics.”
“I think overall the short-term lending market can be proud of what it managed to achieve in unprecedented times. I know there are an awful lot of people who are very grateful, whose businesses, personal lives, and families are better for what the industry was able to offer them.”
“I am sure 2021 will have its challenges, but I feel our industry is ready to take on whatever is thrown at us.”
Beating Stamp Duty Deadlines with Bridging Finance
It remains to be seen whether the government decides to extend the stamp duty suspension deadline beyond March 31 next year. In the meantime, short-term loans like bridging finance could help movers and buyers make the most of the temporary stamp duty holiday.
COVID-19 has had a major impact on all aspects of the housing market. On the High Street, major banks and lenders are processing applications and authorising mortgages much more slowly. Elsewhere, the property chain as a whole is moving at a sluggish pace, often compounded by disruptive bottlenecks.
All of which would be inconvenient at the best of times, though the main concern is with the stamp duty suspension deadline fast approaching. There’s still technically time to organise a home loan, but considering much faster and more accessible funding like bridging finance is nonetheless advisable.
The speed and simplicity of bridging finance
Bridging finance outpaces all traditional property loans and mortgages by a clear margin. Depending on your requirements and personal circumstances, the money you need to purchase a property could be yours within a matter of days.
Specialist lenders issue bridging loans almost exclusively on the basis of security, i.e., the value of your current home or any other qualifying assets you choose to use. If your security is considered viable and comfortably covers the costs of the loan, there’s every chance you’ll qualify and gain access to the money in no time.
By contrast, a conventional home loan or mortgage in the current climate could see you sitting around for days or even weeks, simply waiting for a final decision to be made.
As the government’s stamp duty suspension applies to properties with a market value below £500,000, it applies to approximately 90% of all residential property purchases. This in turn means that nine out of 10 buyers planning purchases between now and March could capitalise on the offer, saving an average of £4,500.
How bridging finance works
A bridging loan differs from a conventional mortgage in that repayment is required within a much shorter period of time. Whereas a mortgage may be repaid over the course of five to 35 years, bridging loans are almost always repaid within six to 18 months.
Interest on a bridging loan therefore applies on a monthly basis, often less than 0.5% with a competitive deal. The funds are made available within a matter of days, the property is purchased, and the loan is repaid in full at a later date when the borrower’s existing home sells.
Where used to leverage the government’s stamp duty suspension, bridging finance could prove particularly profitable. Sourced from a leading lender and repaid as quickly as possible, the subsequent £4,500 average stamp duty saving could cover several of the loan’s major borrowing costs.
For more information on the potential benefits of bridging loans or to discuss the mechanics of the temporary stamp duty holiday in more detail, consult with a member of the team at Bridgingloans.co.uk today.
Bridging Loan Activity Up 40% Year on Year, Despite Lockdown Restrictions
2021 is projected to be a potentially prosperous year for the bridging sector, with activity having already reached record highs despite lockdown restrictions.
That is according to Shawbrook Bank’s newly published Bridging Market Bulletin, which indicates the highest volume of bridging applications ever recorded for the third quarter of 2020. In addition, the market’s return to strength after the initial national lockdown brought a huge 40% increase in bridging loan completions for the same period.
The figures from Shawbrook reflect the predictions of many analysts and economists, who expected to see a major uptick in activity due to the easing of lockdown restrictions and the impending deadline of the government’s temporary stamp duty holiday.
Particularly due to the limited time available to secure funds before the March 31 deadline, more movers and buy-to-let investors than ever before are considering fast-access funding like bridging loans.
Bridging finance activity acceleration
Speaking on behalf of Shawbrook Bank, sales director Emma Cox expressed optimism about the way the bridging sector is headed going into 2021.
“It’s been a difficult time for the property market, and of course the current landscape has left many facing challenges, especially within the bridging space, where some lenders had to halt business in this area for a period of time during the height of the pandemic,” she said.
“It is positive to see many of these lenders recently return to the market, and as our report shows, to see that the housing market is moving again.”
Miss Cox also stated with confidence that the up tick in bridging finance activity is not attributed exclusively to the temporary stamp duty holiday or the release of pent-up demand on the sector. She instead believes that interest among investors in general will continue to fuel the market’s performance even beyond the March 31 deadline.
“Whilst some of this activity in the bridging market will no doubt be down to the release of pent-up demand—something that Rishi Sunak’s stamp-duty holiday will further support—we are also seeing an uptick in investors looking at alternative strategies to sure up investments,” she said.
“The use of bridging to carry out refurbishments and conversions, as well as to aid chain breaks due to elongated sales processes, is an essential funding option that can support lucrative investment opportunities”.
“We recently announced revised pricing across our bridging range, with rates now starting at 0.5% for both regulated and unregulated products, in order to show our continued appetite to aid brokers in making the most of these opportunities.”
“The bridging market has demonstrated remarkable resilience throughout this year, and as much as we may face more challenges towards the end of 2020 and into the early parts of 2021, we believe this adversity may create opportunities for investors and brokers, which Shawbrook plans to continue to support as much as possible”.
Bridging Finance Plugs the Growing Gaps in High Street Lending
Increasingly, the UK’s biggest banks are becoming more reluctant to do business with a growing number of applicants. Mortgage underwriting processes are becoming more complex, and self-employed applicants are facing excessive scrutiny, meaning those unable to access large deposits need not apply.
Little wonder, therefore, that so many are taking their business elsewhere and seeking the support of specialist lenders away from the High Street.
Bridging finance is a booming sub-sector of the industry. While high-street lenders continue to tighten the screws, bridging loan specialists are relaxing their lending criteria, increasing maximum loan-to-value ratios, and even welcoming applicants with poor credit.
The fact that bridging loans can take days to arrange (as opposed to months with a conventional mortgage) is another major point of appeal for many applicants, and many mortgage lenders are now taking much longer to process applications than pre-pandemic.
Flexibility, affordability, and accessibility
Bridging finance has the capacity to effectively reverse almost every complication associated with sourcing traditional high-street loans. Typically secured against the applicant’s property, bridging loans can be offered at a monthly rate of interest of less than 0.5%.
When repaid over the course of months rather than years, bridging finance can potentially be more cost-effective than a traditional mortgage or secured loan.
The speed and simplicity of bridging finance are likely to appeal to those looking to beat the looming stamp duty suspension deadline, potentially fuelling another major spike in activity.
It is highly likely that we will start to see even more people using bridging loans to buy the properties they want quickly and take advantage of the stamp duty holiday. This demand will increase while mainstream lenders are unable to meet the needs of borrowers in the timeframes they require, particularly for higher-value properties where the savings could be up to £15,000.
Other industry watchers have noted a significant increase in the number of applicants using bridging finance to secure properties, subsequently switching to longer-term mortgages to repay the balance more gradually.
However, emphasis was placed once again on the importance of factoring all borrowing costs into the equation when arranging bridging finance.
Often, bridging loans come with an arrangement fee of up to 2%, which on a £500,000 loan would be £10,000 of the £15,000 stamp duty savings.
There would also be survey and legal costs to arrange the bridge, which are in addition to the costs that would be needed for the loan term.
Can a Secured Loan to Consolidate Debt Reduce My Monthly Outgoings?
If you have any equity whatsoever tied up in your home, you may qualify for a secured loan. Even if your equity level is just 5% or 10%, it may still be possible to access a competitive deal.
But does this mean that consolidating other debts with a secured loan is a good idea? If a secured loan is not an option, what alternatives are available for debt consolidation?
The benefits of consolidating debt with a secured loan
One of the main benefits of a secured loan is that you can borrow considerably more than would be available with a personal loan. Secured loans are typically available for sums of £20,000 and more, making them a viable option where a person’s debt level is relatively high.
Whether a secured loan could reduce your monthly outgoings depends on a variety of factors. The most important of which is the length of the loan term, which could be anything from five years to 35 years. The longer the repayment period, the lower the monthly repayments, but the higher the overall borrowing costs.
An individual struggling to keep up with multiple debts and monthly repayments they cannot afford could find a secured loan an affordable and accessible solution. All with the added bonus of safeguarding their credit score, which can sometimes be affected when applying for specialist debt consolidation products.
The drawbacks of consolidating debt with a secured loan
Secured borrowing is considered a higher risk for the customer, as it is necessary to offer an asset (usually your home) as security against the loan. The asset serves as an insurance policy for the lender, who has the legal entitlement to take possession of your property if you fail to meet your repayment obligations.
It is therefore important to consider your current and projected financial situation carefully when considering securing a loan against your home. While most lenders will make every effort to avoid repossession when borrowers fall into arrears, you risk losing your home if you cannot repay your loan.
What are the alternative options available?
A personal loan could be a viable option for consolidating debts totalling no more than £10,000. You will need an excellent credit score to qualify, and you must be able to provide a full disclosure of your current financial circumstances.
Remortgaging is also an option, wherein you effectively increase the value of your existing mortgage to tap into the equity you have tied up in your home. This can be an affordable, long-term solution, often taking just a few days to organise.
Specialist debt consolidation loans are available, though they have the potential to adversely affect the customer’s credit score. Likewise, some consolidation products have high rates of interest and elevated overall borrowing costs.
To find out more, please contact a member of the team at BridingLoans.co.uk; we are waiting to help.