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Bridging Loans On The Increase....

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Another sign of the times...........

Anyone else remember the early nineties and the horror stories we heard regularly then about people who took out bridging loans because for one reason or another they had to buy another house but were unable to sell their existing property ?

They wouldn't or couldn't 'take the risk' of losing the new property so paid for it with a bridging loan in the belief that it would only be a short time before they sold their original property enabling them to pay off the new loan.

Needless to say, in a market where sales volumes had collapsed, many were unable to sell their original house and the lethal combination of their original mortgage and the bridging loan devoured them financially. There was much wailing and gnashing of teeth.

I raise this point because I have recently noticed increasing numbers of adds for bridging loans in the property pages of several newspapers. Once again we are in a situation of collapsing sales volumes and it looks like history is repeating itself. We will soon be hearing more tales of financial ruin just like back in the nineties.

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Another sign of the times...........

Anyone else remember the early nineties and the horror stories we heard regularly then about people who took out bridging loans because for one reason or another they had to buy another house but were unable to sell their existing property ?

They wouldn't or couldn't 'take the risk' of losing the new property so paid for it with a bridging loan in the belief that it would only be a short time before they sold their original property enabling them to pay off the new loan.

Needless to say, in a market where sales volumes had collapsed, many were unable to sell their original house and the lethal combination of their original mortgage and the bridging loan devoured them financially. There was much wailing and gnashing of teeth.

I raise this point because I have recently noticed increasing numbers of adds for bridging loans in the property pages of several newspapers. Once again we are in a situation of collapsing sales volumes and it looks like history is repeating itself. We will soon be hearing more tales of financial ruin just like back in the nineties.

Anecdotal: was just chatting to a middle-aged couple who I'm aquainted with yesterday. They are selling up a large detached family home to retire abroad, so naturally they will be at the top of the chain.

I think they will be sensible and will take 15% under the asking price so that's good. It has been on the market for a while but they have a had a moderate number of viewings and a few potential buyers who like it and want to proceed. But one unusual thing is that every potential buyer they have talked to is trying to arrange finance without selling their current house. Obviously this finance is harder to get than simply selling, buying and porting your mortgage!

I think this must be indicative of widespread seller denial in the mid-chain stratum. Perhaps this is because this stratum has gained most from the boom? Interestingly, it means that if you are higher up the chain, your move can be blocked by seller denial lower down, even if you yourself are being realistic.

frugalista

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Agree absolutley with this post. Any rise in bridging loans will be very significant as once it is taken out the borrower becomes a forced seller and therefore likely to accept a lower price as the financial burden begins to weigh heavily.

It is yet another sign that the housing market equlibrium is well and trely broken due to FTBs being priced out of the market.

I've made this point before; the majority of sellers are not STRs but potential buyers. The reason that there are no buyers is that very few people trying to sell are confident enough about selling to become serious buyers. This illustrates clearly that the housing market is fundamentally broken.

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Has anyone found any definitive recent data on bridging loans? I had a look a couple of weeks ago and I saw that the Bank of England's last data is from 1996.

I was shocked by the number of google hits on "bridging loan" though, and how easy most of the sites suggested they were to get.

Also - interest rates on these things are horrendous - 2% a month? Any miscalculations in how long it will take to sell could really ruin your finances.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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