Can you use a bridging loan to address property market challenges?

The UK property market is currently facing unprecedented challenges.   This is making it more difficult for both property buyers and developers . In this uncertain landscape, the role of bridging finance has become increasingly vital for both parties. 

Before delving into the advantages of bridging finance.  It’s important to first understand the unique challenges that property buyers and developers are facing in the UK.

Intense Competition

There continues to be an acute shortage of properties for sale, resulting in intense competition among buyers.   This scarcity has historically led to skyrocketing property prices,  making it harder for many buyers to enter the market.  Therefore the UK continues to suffer from a structural under-supply of homes.

Mortgages are also harder for borrowers to access, with higher interest rates limiting the loan sizes that are available to homebuyers.   Alongside the ongoing economic uncertainties, property transactions are taking longer to complete.  This has led to chains are becoming more fragile, and more deals are collapsing. 

Quick Move Now recently put out a report stating that 55.8% of property sales in England and Wales outright failed before completion.  This was during the first quarter of this year.  A report by Smoove has said that in 2022, the average time to buy a home was 153 days.  This rose by nearly a quarter since 2019, when the average time was 124 days.

Part X Property Finance

This combination of continuing demand for property from buyers alongside an uncertain immediate outlook inspired our latest product.  This product from Alternative Bridging Corporation is called PartX Property Finance.

PartX Property Finance is designed to help small to medium-sized developers and estate agents by allowing for the quick sale of newly developed properties.   The proposition consists of a pre-agreed part exchange facility that can be used to expedite sales.  It also mitigates against chain breaks on new home developments.

With an agreed facility, developers will have the finance they need to complete a part exchange purchase with the buyer of one of their developed properties.  This will help to accelerate the sales process at a time when sales are taking longer.  Also when sales are not as certain as they were 12 to 18 months ago.

Part X offer support to developers

In addition, PartX Property Finance can be utilised to offer extra funds for light refurbishment for developers who want to make improvements to the part exchanged property to maximise resale potential.

The facility offers support to our developer clients, many whom we have worked with for a number years, but it is also available to developer clients of other lenders.   The bridging finance for PartX takes about as long as a standard unregulated bridging loan to arrange. Terms are agreed at the outset, with all due diligence completed in advance and this means developer can access funds quickly.

Put simply, PartX Property Finance takes the aggravation out of moving home. Developers benefit as the product facilitates the fast sale of a property – at its full value. And the owners of the part exchange property will also be selling their property at full value and completing the purchase of their new home without waiting to find a buyer. 

PartX Property Finance is a product innovation developed to meet the demands of today’s economic environment. It enables developers to maintain the rate of sale on their sites, and importantly to repay their development facilities on time. A further benefit is that the PartX interest rate is likely to be lower than the rate on the development loan that the client has at the time.

The property market is currently a challenging one, but bridging finance has emerged as a lifeline for property buyers and developers. Its ability to swiftly provide funds, bridge delays, and offer flexibility in securing properties and embarking on projects makes it a valuable asset in this unpredictable landscape. For buyers and developers, PartX Property Finance can provide the perfect solution.