The Bank of England Monetary Policy Committee’s three interest rate cuts in quick succession since August last year have stirred up a subdued residential property market, as mortgage rates have tumbled, boosting buyer confidence and purchasing power.
Regulated bridging will always offer buyers a competitive advantage in a rising market. As it pays to be prepared to buy, any buyer has the upper hand if they can arrange financing and move swiftly to make an offer.
Regulated short-term financing effectively puts a house hunter in the position of a cash buyer.
The certainty that they can move quickly with finance in place increases their appeal to sellers while they, in turn, wait for their property to sell.
With the supply of homes for sale far outstripping the number of buyers, regulated bridging—known for its ability to shore up chain breaks, assist with downsizing, and solve short-term financing issues—emerged as one of Knowledge Bank’s top searches over 2023/4.
Why regulated bridging?
In a property-buying process as elongated and uncertain as the UK’s, short-term financing solutions are a useful tool for brokers to have in their back pocket when clients run into difficulties and need help keeping a deal on track.
For clients, it can ensure they complete on the home they’ve set their heart on, and for brokers, it can mean salvaging a transaction that might otherwise fall through.
When the regulated route fits the bill
When discussing bridging finance with a client, whether the deal is regulated or unregulated depends on the property’s use. If the security is residential, held in the borrower’s own name, and intended for their personal residence, it’s regulated.
If the property is owned by a company, it’s unregulated. However, as with all things in life, there are exceptions.
For example, if a buy-to-let property is to be lived in by a dependent or close relative, it becomes a regulated bridging deal.
From a risk perspective, the principle is that if a borrower’s own home is at stake, they should receive legal advice from a broker who can present all the facts—hence, the need for a regulated bridging route.
Awareness of bridging finance isn’t always high, so education is key in spreading the message that regulated bridging loans can be a vital tool when used in the right circumstances.
A classic example is the nightmare scenario of a chain break in a residential sale. If exchange dates have been agreed and legal fees paid, securing a short-term loan with a clear exit plan—such as the sale of the existing property—could make all the difference to a client.
If a client has fallen for their dream home but hasn’t yet sold their existing property, or if a last-minute hitch puts their purchase at risk, a short-term loan could keep their plans on track.
Regulated bridging may also be the answer when a buyer has found the right property, but its condition won’t meet the requirements of a standard mortgage lender.
For example, if it’s missing a bathroom or kitchen, short-term finance can allow essential refurbishments to be carried out to bring the property up to standard for a term mortgage—or go further, if they plan to live in or let it out.
Another situation where time is of the essence is auction finance, where completion is typically required within 28 days.
Regulated bridging can be a practical solution in these cases, helping buyers meet tight deadlines with certainty.
The need for speed
When speed is critical, as it often is with property transactions, securing regulated bridging from a lender with the expertise and processes to meet deadlines is essential.
One way to expedite deals is by working with a lender that understands the importance of speed and builds this into its processes—for example, by offering automated valuation models (AVMs) or desktop valuations.
As a newly launched lender in 2023, StreamBank included regulated bridging as part of its offering from the outset, embedding Consumer Duty across both regulated and unregulated lending to create a seamless process for brokers familiar with residential transactions.
In January, we launched StreamLine, a product designed to streamline the process for larger loans—offering up to £1m with an aurtomated valuation model (AVM) , or up to £2m supported by adesktop valuation.
While we all work in finance, it’s important to remember that our industry plays a fundamental role in helping people secure their homes.
There’s emotion behind every residential purchase, and when deals are on the line, regulated bridging can be a powerful tool—helping buyers navigate challenges, keeping transactions moving, and making a difference when all seems lost.
Roz Cawood is MD property finance at StreamBank
