Bridging Finance Solutions has reported a steep increase in the number of clients securing bridging loans to support their children by purchasing the property.
Young aspirational homeowners 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 deposit size will inevitably improve the rate, whilst parental support will allow their children to take that significant leap onto the property market.
Lee Gilmore of BFS commented: “During the past two years, we have seen a considerable number of parents exploring ways in which they can release equity on a property 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 parent’s 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 straightforward, and we work with clients 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 a 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.
Lee added: “The lending landscape is undoubtedly changing, and we will change and adapt to market needs. 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 solid 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.’