Bridging Finance Solutions (BFS) has reported a sharp rise in the number of clients securing bridging loans in order to support their children through the purchase of property.
BFS says that young aspirational home owners, keen to take their first steps onto the property ladder, are faced with unaffordable house prices coupled with rising interest rates and reluctant lending. Increasing the size of the deposit will inevitably improve the rate whilst parental support will provide the opportunity for their children to take that major leap onto the property market, it argues.
Lee Gilmore (pictured), head of sales at BFS, said: “During the past two years, we have seen a huge number of parents exploring ways in which they can release equity on a property in order to support a home purchase for their children. Cases vary from lenders waiting for a property in probate to using equity from their own homes or a second property.
“Limiting factors for obtaining traditional finance, such as a re-mortgage, could be the parents age and reduced income. In addition, if the property they wish to purchase is in poor condition, it may not be mortgageable conventionally. Often these cases are not wholly straight forward and we work with clients in order to devise the best solution.
“The property market can be fast moving for first time buyers with homes often snapped up in days. Speed is the key, whilst an average mortgage takes 10 -12 weeks to organise and complete, a bridging loan typically takes 10 -12 days, giving the buyer cash status and therefore enabling purchasers to negotiate the best deals.”
According to research from the Home Owners Alliance, It’s not just first time buyers needing financial help. 61% of the Bank of Mum and Dad’s total lending in 2020 went to the over 35s looking to make the move to next step properties whilst one in ten (9%) of people aged over 55 planning to buy a home said they would have had to delay their purchase without financial support from the Bank of Mum and Dad.
Gilmore added: “The lending landscape is undoubtedly changing and we will change and adapt in line with market need. As part of our responsible ending, we must ensure that clients are not putting themselves under financial pressure in terms of borrowing and have a definite exit strategy within the given timeframe.
“Under current economic conditions we expect to see to see this client profile increasing and take enquiries daily from the ‘Bank of Mum and Dad.’”
