At KIS Finance, one of the largest independent bridging loan brokers in the UK, we have seen a massive 121% increase in bridging loan enquiries since the government announced the Stamp Duty Land Tax temporary reduced rates on 8 July 2020.
This is in comparison with the average number of enquiries, per month, in the three months from the beginning of April leading up to the announcement in July.
Whilst it’s fair to say that the number of bridging loan enquiries were lower in those three months than what they were last year, due to inactivity in the housing market during the UK lockdown, the Stamp Duty temporary reduced rates have stimulated a ‘mini-boom’ in the housing market as property values jumped by 1.6% in July, according to Halifax’s price index.
In turn, this has seen a much faster recovery in the bridging and short-term lending market than we were expecting.
People who were planning to move house anyway are now speeding up house purchases in order to take advantage of the Stamp Duty relief, and bridging finance is being used to secure their purchase before selling their current property.
Although the Stamp Duty holiday is in place until March 2021, it has acted as a psychological boost for those already planning to buy and its created almost a deadline for moving house. We have also seen that many people are desperate to move to larger homes with gardens, after being stuck in a small property and working from home during lockdown, as some fear another lockdown or are facing the prospect of working from home on a permanent basis. These two factors are making buyers act quickly and are partly responsible for this surge in activity.
Since the start of the pandemic, mortgage lenders have reduced their LTV’s (loan to value) which is pushing some people out of the market as they can no long borrow as much as they need, even if they previously had a mortgage agreed in principle. Many have unfortunately also lost jobs or have been furloughed during the last few months, resulting in them now struggling to prove income and qualify for a mortgage, so are having to pull out of property chains.
This means that those who have had buyers let them down have been turning to bridging finance to continue with their purchase and keep property chains going. Whilst the 3% Stamp Duty surcharge on second properties is still payable (refundable once the original property is sold), those buying properties for under £500,000 are still benefiting from the Stamp Duty temporarily reduced rates.
Landlords are purchasing additional properties and expanding portfolios as the Stamp Duty threshold changes apply to second homes and buy to let properties in England and Northern Ireland. This is bringing more properties into the rental market and is providing more homes for those currently unable to secure a mortgage and buy.