This isn’t a huge surprise, given the number of base rate hikes that we’ve seen of late, with six separate increases taking place since December — and it seems likely that we are set for more increases too.
Both bank and swap rate rises have had the inevitable effect of pushing up the interest rates charged on regular and BTL mortgage deals. As a result, advisers will have had dealings with frustrated borrowers, who realise they have missed out on the absolute lowest rates around and who are bemoaning the fact that they didn’t move more swiftly.
However, there is one area of the market where this isn’t the case currently — the bridging market.
Unmoving rates
What’s incredible about bridging rates at the moment is what’s not happening. While other property loans are becoming more costly, when it comes to bridging loans, we’ve noticed that rates generally tend not to move.
This is even more notable when you look at the lenders who are active in both the BTL and bridging sectors. While they may have withdrawn and repriced their BTL deals, chances are their bridging deals are unchanged.
This is likely a play for market share, with lenders happy to accept slimmed-down margins in order to maintain their spot within the bridging sector. This is an incredibly competitive market and, in fact, has only become more competitive in recent years, with the entrance of so many new lenders.
The thinking seems to be that by accepting a lean few months, they can keep the competition at bay and maintain their market position, allowing them to reprice later this year.
The clock is ticking
If we are being realistic, this situation is not particularly sustainable. It’s one thing for a lender to accept almost non-existent margins for a short period in order to maintain market share, but that isn’t a strategy they are likely to stick with for too long.
As a result, it’s a question of when and not if bridging rates rise. What’s more, it’s likely to be something of a domino effect — once the leading lenders reprice, others seem sure to follow.
This is an important prompt for advisers and their investor clients. What’s clear is that not only are rates as low as they have ever been, they also won’t be around for much longer.
The bridging market has always been a speedy one, with investors wanting to secure the funds swiftly in order to snap up excellent properties before rivals step in and drive up the price. However, this emphasis on being able to move quickly is only going to become more important in the months ahead, when we are likely to see rates begin to move.
It’s important therefore for advisers to ensure their clients are fully abreast of the market at the moment, so that they understand why time is of the essence if they are planning to add to their portfolios.
It’s also crucial for brokers to make the most of specialist partners. Expert packagers like ourselves have strong relationships with lenders and an intimate understanding of how best to present a case in order to gain approval from funders. That can make all the difference for borrowers facing a tight deadline, no matter the reason.
Ensuring that you have those partnerships in place means your clients are guaranteed the best chance of getting the rates they need for their projects before those rates start to go up, as they inevitably will.