The buy to let sector continues to show significant growth, in direct correlation to the ongoing increasing demand for rented accommodation throughout the country. A report from the Council of Mortgage Lenders (CML) states that the number of loans secured for the purchase of Buy to Let investment property increased by 37% year on year to February 2014.
This significant reported growth has had a direct related impact on the level of activity within the bridging and short term lending arena. The Association of Short Term Lenders (ASTL) reported an 83% increase in bridging loan applications in Q1 2014, compared to the same period last year, and there is no doubt that much of that growth is fuelled by bridging loan demand to support residential Buy to Let investment opportunities.
This notable level of growth in the sector is further evidenced by Moneyfacts reporting that ‘60% of buy to let landlords are looking to expand their portfolio’. This level of confidence and aspiration to further develop will be facilitated by the significant number of developments and new products that have been introduced within the bridging and short term sector, including the 0.85% fixed residential buy to let investment product launched by Bridgebank Capital.
Whilst there has been an upturn in the number of term buy to let products available to borrowers, many traditional lenders still remain risk averse or are unable to complete property investment transactions with the level of speed required. Bridging finance therefore acts as a key facilitating tool for property professionals for completing residential buy to let investment purchases, providing the time and flexibility required prior to securing a term buy to let mortgage.
With the HMRC reporting that the number of residential property transactions has increased year on year (205,000 Q1 2013 to 266,150 Q1 2014), whilst the cost of property is increasing, it is evident that the level of competition for investment property will continue to rise. It is therefore essential that property investors wishing to secure buy to let property can access the short term finance required to complete the purchase.
Due to the level of competition in the market, bridging finance can be a valuable tool for property professionals to secure a breadth of buy to let investment opportunities including auction purchase, property conversion and refurbishment to name only a few. For example, a property requiring minor refurbishment work or those classed as ‘unmortgageable’ can be acquired using bridging finance, refurbishment work carried out and a term mortgage secured on the uplifted value of the property. This is just one example of how bridging finance supports property investors achieve portfolio growth, therefore contributing to the buy to let market.
Overall, the bridging and short term sector has an essential role in the buy to let arena. It is evident that the future growth of both industries will rely and support one another.
Stephen Woods is head of sales at Bridgebank Capital
