05 Oct Property Finance Alternatives – How Britain buys property.
An eye opening research exercise has recently been undertaken by Market Finance Solutions. The independent research that was commissioned by the bridging lender covered a nationwide representation of over 2000 UK adults. Of those surveyed that had bought a property since 2007, 52% either used a mortgage or remortgages elsewhere to finance their property. Approximately one in five (around 19%) used property finance alternatives to purchase their property.
Property Finance Alternatives and Age
The survey revealed the approach that different age groups take when seeking out property finance. Those seeking funding between the ages of 18 and 34 are the most likely to seek and take up property finance alternatives. This figure includes mostly bridging loans and unregulated mortgages. While this may reflect a greater knowledge base amongs this age group, it still only made up 29% of this group – less than a third.
Nevertheless, as the industry in property finance alternatives has grown, so has the demand. Currently valued in excess of £4.6 billion the uptake is growing. Alternative forms of finance aside from bridging loans includes mezzanine finance, unregulated loans and crowdfunding.
Experience with subsequent purchases
Reliance on the mainstream property mortgage market means that many buyers are limited in their options. Furthermore approaching the mainstream market may in fact exclude them altogether. The research showed that as people climb the property ladder their knowledge of available products increases too. 13% of respondents used a bridging loan for their first home purchase. That figure increased to 21% when people were buying a second home.
Fear reflected in losing out on a purchase due to delay had a direct influence on product choice for many home buyers. Of those that expressed this fear 24% said they would have considered other products. Timing and that feat of delay prevented them from exploring other products further.
Over 49% did not understand bridging loans and how effective they can be. Especially in a fast moving property market. Educating for the financial consumer and specifically the home buyer about really good alternative financial products is key. It may in fact be the next step in opening the property market.