Buy to let property investors increasingly using bridging loans, research shows
There is a growing demand for bridging loans in the UK from buy to let investors, with a 25% increase in loans taken out in 2013 to fund property acquisition and refurbishment, new data shows.
Research from Positive Bridging Finance reveals that the average bridging loan now stands at £220,000, up 5% year on year and that the average term is six months. Gross bridging reached £1.79 billion in year to August 2013, totalling £364 million July and August alone.
The findings also indicate that 36% of buy to let investors are using bridging products to acquire terraces and town, 29% for flats, 9% for semi detached properties and 5% detached properties.
According to John Waddicker, director of Positive Bridging Finance, more and more buy to let investors are realising the benefits of bridging finance to acquire and refurbish properties. ‘While the availability of buy to let mortgages is improving, bridging provides fast, short term loans that are ideal for turning round properties quickly. We have seen the buy to let demand for bridging loans leap this year and we believe this will continue in 2014,’ he said.
‘With property prices increasing across the UK, many buy to let landlords are looking for below market value properties which will give them greater yields on rental income. Landlords are using bridging loans to finance the development of properties which they may be unable to secure mortgages for,’ he added.
Meanwhile, research by Manchester based buy to let specialist, Sequre Property Investment, has revealed that over 50% of over 50s consider either buy to let or buy to sell property as the most attractive investment option when planning their family’s financial security, ahead of shares, equities, antiques or any other investment type.
Sequre found that only 10% of over 50s are happier with their plans for retirement now than they were five years ago. This reaffirms the company’s belief that those in their 50s and approaching retirement are losing faith in banks, shares and their pensions, and beginning to consider that property investment is, on balance, the safest and most rewarding alternative.
The survey results also show that almost 60% of 50 to 59 year olds would invest in property to secure their children’s or grandchildren’s future, ahead of another investment type. This percentage decreases as the age of respondents increases, with only 25% of over 80s considering property investment as the most attractive investment option when planning their family’s financial security.
This trend strengthens the idea that those approaching retirement have an increasingly positive outlook on property investment, something which Sequre’s managing director, Graham Davidson, believes is down to a lack of trust in banks and volatility in the stock market.
‘We have identified a sharp increase in the number of investors who are approaching retirement coming to us with an interest in the rewards of property investment and its potential to ‘rescue’ their retirement plans,’ said Davidson.
‘[I think this demographic, feeling let down by banks and the performance of the stock market, is wising up to the appeal of buy to let investment as an income source in retirement which can also provide ‘lump sum’ financial security for their family. The fact our research found buy to let investment is more than twice as popular as shares amongst over 50s speaks for itself,’ he explained.
Sequre, which specialises in the provision of high-income producing, buy to let property in a number of major UK cities, is now registering more than 1,500 enquiries from potential investors each month. More than half of the enquiries Sequre receives are from investors over the age of 50.