Ahead of the forthcoming stamp duty threshold changes, buyers are facing a cliff-edge in the shape of a potential higher tax bill, meaning the stampede to complete will only grow as we approach the end of month deadline.
The pressure on conveyancing firms in particular has been building for months, but brokers are also going to find themselves in a potential bind, as would-be purchasers seek to put the pressure on all stakeholders to make their completions happen. Unfortunately, not all are going to make it.
Recent research from Rightmove suggests around 74,000 home buyers across England could narrowly miss the stamp duty deadline on the 31st March. Overall, the net effect for all buyers that miss it could be a collective £142 million in additional stamp duty tax, against the lower levy applied in March. You can see why the pressure will only rise throughout the month.
That being the case, if the deadline could impact any of the cases on your desk, and if they haven’t asked already, then plenty of your clients may still want a conversation on a back-up plan ahead of completion.
The big question of course is where you might be able to turn in order to provide a safety net for those who are reaching the end of March and are becoming increasingly worried about meeting that deadline.
It’s here where the ‘stitch in time’ short-term products particularly bridging can provide that solution, while also cementing a client-broker relationship as you’ve provided the outlet for completion, and it has the added benefit of providing the adviser with a potential new advice specialism.
Which of course, is not to say, that all residential-focused brokers are completely unaware of the options available to them with short-term finance, or indeed other similar options such as auction finance, or commercial or development loans.
Indeed, it may well be that brokers have been seen a growing number of potential clients in this space. Small-business owners perhaps who have been looking to buy office space instead of rent, refurbish property or restructure debt. Given the changed tax regime for investment property, landlords are also restructuring residential-only portfolios to maximise returns, diversify for risk and trim costs.
So, residential brokers may have been utilising shorter-term options more frequently, however every day can be a learning day, and even if you have written more of this business, you may not feel as confident or competent at this moment in time. Particularly when the market shifts so frequently.
As always, the key to a successful bridge is going to be a solid business case for the loan and a clear exit at the end. Usually, in these stamp duty related cases it’s going to be a refinance back to a longer-term, standard mortgage loan within a set timescale.
Bridging loans are assessed on the asset, not the client’s credit history, so poor credit may only become a factor if the exit involves further finance, although plenty of specialist adverse lenders consider these applicants.
Even knowing this, we fully understand that brokers who offer the majority of their advice on residential mortgages may be uncomfortable advising on short-term finance. Often, the jumping off point comes with the confidence to pick up the phone to a specialist lender and present the facts of a case to see if the appetite to lend is there and discuss possible exit strategies.
That’s of course where we come in, being able to offer bridging finance (or other) solutions to those that have a time imperative with their case, and of course want to be able to get a purchase in under the wire of that stamp duty deadline is going to be a prime example of a case we can help turn around quickly to satisfy all.
We’ll work through the case with you, support your advice to the client, educate you at what is happening, and importantly, communicate fully with you and the client to make sure they’re also aware of what is happening, and when we can release funds, etc.
We’re always keen to act as mentors for brokers who are keen to do more in the bridging space. The next few weeks in particular might well require this type of service more than most, and working with an established player like ASG should provide you with the certainty and confidence to complete more of this business.
When time is of the essence, the right short-term lender partnership could get you and your client out of a tight spot and become a friend for life.
