Are there any cheap loans out there?
When talking to lenders in the property market space the current story is grim. An uncertain future and the ring-fencing of rising interest rates. Not a huge surprise, given the number of base rate increases that we’ve seen of late, and another hefty hike in the pipeline. We have seen the inevitable effect of this reflected in the residential mortgage and Buy To Let Mortgage markets and a clear picture emerging in the development Finance space… All of this leading to frustrated borrowers who have either been unable or to slow to take advantage of what has been an unprecedented lending market for the last few years.
So is there anywhere that a decent deal can be had?
The answer is yes! But not for long… The answer lies in the bridging market
What’s incredible about bridging rates at the moment is what’s not happening.
We have seen lenders rates for development lending rise way beyond the base rate increases, with Banks and Independents alike protecting their margins against future uncertainty.
We have seen some fixed rate products come into the market but again at rates that make the eyes water when compared to what was available just 6 months ago. And Portfolio BTLs and other specialist mortgage rate have also shifted skywards and are taking forever to complete.
But the bridging market has remained (so far) relatively unmoved with rates as low as 0.5% PCM still attainable. And being rolled up means these are also fixed for the term!
So why is the bridging market still offering low rates?
This is most likely a play for market share, with lenders happy to accept slimmed-down margins in order to maintain their spot within the bridging sector.
The bridging marketplace over the last few years has become hugely crowded with the influx of many new lenders, and increasingly competitive. The prevailing attitude when discussing their position with Lenders seems to be that by accepting a lean few months, they can keep the competition at bay and maintain their market position, allowing them to reprice later this year.
A bridge at little more than a Buy to let Mortgage rate? How long can that last?
Not long is the answer…
Being realistic, this situation is not sustainable. It’s one thing for a lender to accept almost non-existent margins for a short period in order to maintain market share, but that isn’t a strategy they will stick with for long.
As a result, it’s not a question of if, but when will bridging rates rise. And this is imminent - weeks rather than months! What’s more, it will snowball. Once the leading lenders re-price, all others are sure to follow.
If you have a need to refinance, or capital raise, don’t prevaricate! don’t wait! Talk to your property finance broker today and find out what your options are…