Bridging Finance And Property Market

Bridging finance comes to mind when you think about purchasing a property and selling an existing one. Have you ever considered what decides the property market trends and how bridging loans are suitable? 

Most new investors and developers can’t understand the connection between the overall economic situation and the housing market. Surprisingly, the single housing sector is the cog in the economic wheel of every country, let alone the UK.

Thus, it is more than necessary to keep an eye on the housing market and how it translates to the bigger picture. 

In this article, we have outlined the importance of the property market, its major implications on the economy, and the importance of bridging loans. So, stay tuned if you want to know where the market is heading. 

How does the UK’s economy affect the property market?

The property market doesn’t grow or contract in isolation from the economy. Both are hand and glove with each other. 

So, it’s important to hold a holistic view as a property developer, an investor, or an individual looking to buy a new home.

While getting to the nitty-gritty of the housing sector, it’s necessary to hone some facts. The UK's construction industry contributes to 7% of the country’s GDP. 

Apart from construction, the second important sector is taxation. Both these sectors have a direct link to the housing market.  

More than 50 industries are directly allied with the housing industry. Thus, refurbishing or constructing a home brings economic activity into society. So, a slight change in the economic drivers can snowball the effect on the housing industry or vice-versa. 

Besides, the banking sector is immersed from head to toe in the UK property. Around 50% of the banking is based on property loans UK.

So, any change in the monetary policy and interest rates is a surefire for the property market. That’s what we have seen in the current situation. 

How is the turbulent economy affecting the property sector?

The housing market flourished in the past few decades as more people went for bridging and P2P lending. 

A major blow into the deflated industry was after Covid-19. As economic activity resumed, so was the investment in the property. 

Buyers emerged from every corner of the UK to tap on the Stamp duty holiday. It increased the competition in the sector, rising house prices to extremes. 

In response to the high spending and thanks to the Russian invasion, inflation grew to double digits of more than 10%. 

The central bank has increased the base rate to 2.25% to curb sky-high inflation. Adding fuel to the fire, homeowners now have to pay more for mortgages. Therefore, the overall cost of spending and living has increased. 

To much surprise, the property market is still growing. The reason is that people feel the urgency to buy a house now before the central bank’s new update in the base rates. 

The frenzy of buying a house can’t do anything other than increase house prices further. So, it’s high time for developers to resort to short-term loans before the interest rates go up. 

Why is bridging finance suitable in the current property market?

Bridging finance is a short-term loan secured against the property that provides instant funds to the borrower. The loan term for personal bridging loan can be between 3 months to one year. 

As it is secured against a property, you avail yourself of this opportunity to buy a house or a commercial property if you possess the property as collateral. 

Benefits of bridge finance:

These are some of the key benefits of bridging loans for you.

Convenient Lending:

Bridging loans are provided by a host of challenger banks and financial institutions. Regarding short-term finance, we see a steady growth of P2P lending platforms. They have got enough traction because they meet the right lenders to the borrowers. 

Both lenders and borrower match their terms and conditions of lending out the money. The person on the receiving end can sign a deal and propose an exit strategy. 

Therefore, it’s super convenient for a bridging loan to acquire a tract of the property before your owned property sells in the market. 

Also Read: Looking To Buy A New Home?

Instant Funding:

The current property market is pumped up with mind-boggling prices, and no one knows when the market will cool down. Thus, house buyers are in haste to grab a reasonable deal before the next prices jump. 

The current market situation makes bridging loans a good option to get a loan in less time. Compared to mortgages, you can easily get a loan quickly.

Depending on your paperwork, you may take a few days to a few months to take a bridging loan. Right now, banks have tight loan terms, and they may even refuse you the loan if your income is less than their set standards. 

However, a P2P lending platform doesn’t care about these terms. Even if you have a moderate credit score and a good history, you are likely to get a loan. 

Final words:

Bridging loans are a popular option to get funds in times of inflation. As the property market is teeming with raging prices, you can see an enormous opportunity to buy a house. 

It is expected that the Bank of London will increase interest rates to 4% in the next year, according to JP Morgan. 

So, it’s high time to spend your saved money on the right investment so that you can get overvalued assets once the time is ripe, you can get overvalued assets. 

This article explains the relationship between the property market and bridging loans and how economic conditions can upset the market. Let us know about your feedback in the comments.