Bridging beyond buy to let

Despite the stamp duty tax changes announced by George Osborne in the autumn statement for second homes and buy to let, Clever believe the variety of uses for bridging will mean it will continue to be a very popular form of finance.

There are plenty of other uses for bridging finance which Clever Lending have processed and these have resulted in increased business levels. After all, as long as there is suitable security, a short term loan can be used by businesses or private individuals to cover almost any immediate finance need where there is a time delay between one transaction and another – tax demands, probate resolutions and cash flow glitches to name a few.

The increase in bridging seen by Clever Lending reflects these uses and are in line with recent figures by the Association of Short Term Lenders (ASTL), who reported bridging lending as a whole increased by over 30% in the last year.

So how will bridging fare after the stamp duty rises for second properties and rental property kicks in? We are likely to see lenders, who have plenty of funds to lend, focus their marketing on the other loan purposes too, as some would-be private landlords may no longer enter the market due to the higher costs involved.

However, there will still be a need for bridging when it comes to property acquisition or renovation. The speed and flexibility of bridging means that it’s still a very useful facility in circumstances such as simply bridging one property if there are delays in buying another – we all may have forgotten but this was the original use of bridging finance back in the day. It’s also a flexible way of buying at auction or arranging a quick purchase at a special price. During the bridging term, renovation works can also be completed. But the fear for tenants is that one way for landlords to minimise their extra costs is to increase rents, and with tenants already paying rents which are increasing faster than house prices, this could have a significant knock on effect.

Sonny Gosai, Sales and Operations Manager, said: “Buy to let is under the microscope as a result of the stamp duty tax changes coming in to force in 2016 for second homes and rental property.

Despite future tax concerns, the broker clients we are dealing with have retained optimism in the market for bridging finance and its many uses. We’ve already had discussions with brokers and lenders to widen the appeal of bridging and have had applications in for many other purposes this year, not just for property. This indicates there’ll still be a need for bridging finance, in all its forms.

As for buy to let, we’ll see a stabilising of the market in the next year or so and landlords and property buyers will look for ways to minimise the tax implications, which landlords are already starting to do.”