Why is Demand for Large Bridging Loans on the Rise?

Posted by Market Financial Solutions on 11th November 2021 -

The rising demand for large bridging loans is one of the curious trends to have emerged from the pandemic. By large bridging loans we loosely mean loans worth over £4 million. They are, therefore, typically used in specific situations.

When are large bridging loans used?

We’ve seen a notable rise in enquiries for multi-million-pound loans over the past 15 months. The stamp duty holiday prompted a surge in activity across the UK housing market, and property investors were keen to capitalise.

Here are some of the most common scenarios when a large loan may be necessary:

1)      Finance for luxury properties

The UK is home to countless luxury properties, from:

• Country estates
• Victorian townhouses to penthouse flats
• Prime London dwellings

As house prices have risen over the past year, increased properties have been valued at well above £1 million. On average, UK residential properties increased in value by 10.6% between August 2020 and August 2021.

Source: Office for National Statistics

 

Many people investing in the UK’s luxury properties, particularly in the prime London market, require large bridging loans given the price they are paying. Despite the withdrawal in the London property sales market – the city still sees the highest average price per property in the UK.

2)      Commercial property purchases

The commercial property market has had a turbulent time of it during the pandemic. However, as high streets come back to life and businesses return to their offices, the commercial sector is bouncing back. Commercial assets could be anything from:

• Office building
• Warehouses
• Shopping centres
• Mixed-used properties (often known as semi-commercial assets)

Property investors are now looking to invest in commercial buildings. Given they are typically large buildings with strong rental potential, these properties often carry a high value. This means buyers will usually require large loans. As was the case for a recent client who bought a commercial property in Berkshire.

3)      Funds to increase large property portfolios

The stamp duty holiday offered property buyers potential tax savings of up to £15,000. This, combined with the lasting appeal of bricks and mortar as an investment option, resulted in a competitive marketplace. With such a high-savings on offer, buy-to-let investors jumped at the chance to expand their portfolios. Those looking to expand their portfolios, potentially by buying multiple properties at once, may need large bridging to do so.

Our recent research showed that 38% of UK property investors bought another house or flat during the stamp duty holiday. You can download the full report here.

How MFS has responded

The above are just a handful of the reasons why large loans bridging loans have become highly sought after. Property development and renovation projects, as well as refinancing cases, are other common reasons.

Here at MFS, we specialise in complex cases and large bridging loans. During 2021, we have expanded our maximum loan amount to £30 million+, as we consider loans above this value on a case-by-case basis.

With extremely strong funding lines and experienced underwriters, we’re perfectly placed to assist brokers and clients with multi-million-pound bridging loans. Indeed, there are many lenders who are ill-equipped, either due to finance, skill, or their lending criteria, to serve this large loan market. But not MFS – we embrace the challenges and allow our clients to act with speed and confidence.

For more information head to our dedicated large loan section page. Or, read one of latest examples of a large loans case studies here.

Alternatively, to speak to a member of our team and find out how we could support your property investment in the months to comes. Get in touch today.