Jump to content
House Price Crash Forum
Sign in to follow this  
cobra0

Why Are Chains More Popular?

Recommended Posts

MOD? I don't know if this is supposed to go here or into economics. Please move it if so.

I got quite interested in the problems of chains (A buys B' house, who buys C's, who buys ...) and have read about the problems associated with it. (break- down risk, ...)

Then I have come up with an alternative, and during my research found that my "invention" has been around a long time already, it is called a "bridging loan" (allowing B to buy C's house, before selling his own. During that time B practically serves 2 mortgages).

If bridging loans are around for so long, why are chains more popular than bridging loans?

I can understand it in the current bear market, who would want to risk 2 repossessions.

But why are chains also popular in the bull market? (It was when I bought my house)

Share this post


Link to post
Share on other sites
MOD? I don't know if this is supposed to go here or into economics. Please move it if so.

I got quite interested in the problems of chains (A buys B' house, who buys C's, who buys ...) and have read about the problems associated with it. (break- down risk, ...)

Then I have come up with an alternative, and during my research found that my "invention" has been around a long time already, it is called a "bridging loan" (allowing B to buy C's house, before selling his own. During that time B practically serves 2 mortgages).

If bridging loans are around for so long, why are chains more popular than bridging loans?

I can understand it in the current bear market, who would want to risk 2 repossessions.

But why are chains also popular in the bull market? (It was when I bought my house)

Because there are many risks in this approach. You have to pay the mortgage and outgoings for two properties. What if you can't sell your old one, what if it burns down/floods/has a new planning application notice for a halfway house nextdoor served on it. There is just too much risk in bridging loans. Banks also are not keen on lending that sort of money to just anyone, and that was in the good times. If anyone was worried about being in a chain I would suggest that they sold their own place and went into rented for six months before buying another house.

Share this post


Link to post
Share on other sites

A couple of theories

1. People have tended to borrow to the max, leaving no room in the finances to serve two mortgages.

2. Property was selling very quickly, the need for a bridging loan was therefore redundent.

Share this post


Link to post
Share on other sites
Because there are many risks in this approach. You have to pay the mortgage and outgoings for two properties. What if you can't sell your old one, what if it burns down/floods/has a new planning application notice for a halfway house nextdoor served on it. There is just too much risk in bridging loans. Banks also are not keen on lending that sort of money to just anyone, and that was in the good times. If anyone was worried about being in a chain I would suggest that they sold their own place and went into rented for six months before buying another house.

Share this post


Link to post
Share on other sites
A couple of theories

1. People have tended to borrow to the max, leaving no room in the finances to serve two mortgages.

2. Property was selling very quickly, the need for a bridging loan was therefore redundent.

Fair comment, especially 2. We have now gone to the other extreme, so maybe bridging loans never really work because the housing market is either in a boom (10 years time, maybe) or a bust, like now.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 396 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.