Possible further rise in demand for bridging finance
There has been a substantial rise in the amount of bridging finance that has been raised by businesses and private individuals over the last couple of years. Bridging loans are used for many reasons but have been increasingly used as an alternative method of finance due to more traditional lenders being unable to help due to greater restrictions in their underwriting.
The UK property market is struggling and most lenders need to see improvements in the values of residential and commercial property in order to encourage them to relax their criteria and increase lending.
In order to help provide a much needed boost to the property market the UK coalition government have come up with some interesting proposals. These proposals are designed to alleviate some of the different problems that the property market is struggling with. The main problems are recognised as being that builders and property developers need to be encouraged to start building new homes and first time buyers need to be able to obtain mortgages in order to be able to buy their first home and get a foot on the property ladder.
To encourage property developers the government has targeted developers who already own land which is lying undeveloped because it is not financially or economically viable for them to start building on it. Developers who have land lying undeveloped for this reason will be able, under these new proposals, to apply for subsidies to help finance the new development. It is hoped that this will provide an increased supply of new homes, create jobs and stimulate the property market. Such developments will surely be of interest to lenders who will need to provide development finance and bridging loans in order to further finance such projects.
Money will also be made available to local authorities so that they can invest in new infrastructures that will in turn enable and help new developments.
Of particular interest is the new proposal to help first time buyers obtain a mortgage. Currently first time buyers are restricted to 75% and 80% mortgages meaning that they need to find quite large deposits in order to buy their first home. The new proposals will mean that first time buyers will only need a 5% deposit as lenders will once again provide 95% first time buyer mortgages. The mortgage companies will be encouraged to do this because the government will guarantee a proportion of the mortgage in the event of repossession. Therefore the mortgage companies will still only be carrying a risk of up to 80% because the buyer will be paying 5% and the government will be guaranteeing 15% in the event that payments are not made and the property has to be repossessed.
These are all interesting proposals which will all combine to hopefully help provide the property market with a big boost.