How are property investments financed in the UK?

Warren Lewis
28th September 2018
Question 254

The latest research from Market Financial Solutions has uncovered how Britons are financing their property investments, and the factors influencing their decision.

The research of over 2,000 UK adults found that 42% of all people who have purchased a property since 2007 were cash buyers and 52% used a mortgage or re-mortgaged to finance their property purchase. Nearly one in five (19%) used a form of alternative finance such as crowdfunding, mezzanine finance or unregulated loans and this number jumps up to 29% for those aged between 18 and 34.

The research also found that 13% of homebuyers said they used a bridging loan. When asked about the factors influencing their decision, 37% of homebuyers said they relied on a broker to recommend the different financial products available to them. However, 46% stated they did not have enough knowledge or confidence in finance options other than mortgages to consider using them.

When it comes to buying a property, UK homebuyers may rely predominately on mortgages and cash payments, but their knowledge towards other financial products is limited, new research by Market Financial Solutions (MFS) has revealed.

The bridging lender commissioned an independent, nationally representative survey among more than 2,000 UK adults to uncover just how Brits have been financing their property purchases. Of those who have bought a property since 2007, 42% identified as cash buyers while a further 52% said they had used a mortgage or re-mortgage.

Taking into account the rise of the UK’s alternative finance industry – currently worth over £4.6 billion – the research also revealed a noticeable uptake in products outside of mainstream loans. Nearly one in five (19%) homeowners said they had used a form of alternative finance, ranging from crowdfunding to mezzanine finance and unregulated loans, with this figure rising to 29% among respondents aged between 18 and 34. Meanwhile, 13% of homebuyers said they had used a bridging loan – this number increased to 21% for those who were investing in a second home.

Deciding on how to finance a property purchase can seem overwhelming given the number of loans and products currently available in the UK. As a result, 37% of homebuyers have relied on a broker to help them find a financial product best suited to their needs.

However, MFS’s research also showed that the reliance on mortgages and cash payments was partly due to a lack of knowledge surrounding other available finance options. Reflecting the competitive nature of the country’s property market, nearly a quarter (24%) of buyers said they would have liked to have considered other financial products but feared they would lose out on their property purchase if they delayed their credit decision. Delving into awareness of specific alternative finance products, nearly half (49%) did not have a strong enough understanding of bridging loans or the situations in which they can be used.

Paresh Raja, CEO of MFS, commented on the findings: “Mortgages have long been the go-to method for financing a house purchase in the UK. But over the past decade, a range of new alternative finance products has arisen to give buyers different options that might be better suited to their needs. However, today’s research demonstrates that there remains a lack of understanding about what these options are and how to use them.

From crowdfunding platforms to raise a deposit, through to bridging loans to buy a property at auction, there are many opportunities now accessible for those needing to access credit, and to remain reliant on the mortgage market could restrict an individual’s ability to get the funds they need. Indeed, in the UK’s competitive property market, it is essential that buyers are aware of the financial products they can choose from, in turn putting themselves in the best position to progress with a purchase quickly and efficiently.”

Related articles
More from Finance
Latest from Financial Reporter
Latest from Commercial Reporter
to our newsletter

Join a community of over 30,000 intermediaries and keep up-to-date with industry news and upcoming events via our newsletter.