One of the main headlines which emerged from the recent Budget is the impact of stamp duty changes on the housing market, particularly those affecting property investors and landlords. In an effort to give first-time buyers and homeowners a competitive edge, the government has increased the stamp duty surcharge on additional properties from 3% to 5%. The Treasury expects this change to result in 130,000 extra transactions by first-time buyers and movers over the next five years and raise more than £1.2 billion in tax revenue by 2030.
This is a shift which will inevitably present some additional challenges for property investors and landlords going forward, although we have yet to see any real impact on our current pipeline. However, there was another stamp duty ramification, which flew a little more under the radar, which see more of an immediate impact on the specialist lending market, particularly in terms of demand for bridging finance.
The expiration of temporary stamp duty relief on 31 March 2025 will undoubtedly add urgency to a raft of residential property transactions. From April 2025, the nil-rate band for standard residential purchases will drop from £250,000 to £125,000. First-time buyers will see their relief threshold reduced from £425,000 to £300,000, and the maximum property price eligible for first-time buyer relief will decrease from £625,000 to £500,000. These changes will place even greater pressure on the tax burden for many transactions and potential chains across the UK, creating a deadline that could trigger a flurry of activity in the property market, increasing the risk of chain breaks and transaction delays.
Bridging finance is set to play a critical role in navigating these challenges. Historically, bridging loans have been vital in resolving chain breaks, allowing buyers to complete purchases even when complications threaten to derail transactions, potentially saving buyers thousands of pounds and sparing them the emotional stress of losing a property.
The sector’s recent performance highlights its growing profile, perception and importance from a consumer and intermediary perspective. Bridging completions reached a record £1.79 billion in Q3 2023, according to the Bridging & Development Lenders Association (BDLA), representing a 2.6% increase from Q2. The overall loan book value has now surpassed £9 billion, and the pipeline of future business is strong, with applications rising 6.7% to £10.9 billion in Q3. This robust growth reflects a sector that is not only expanding but also evolving to meet the needs of today’s dynamic property market.
Advisers are becoming increasingly aware of the strategic role bridging finance can play. More brokers are identifying scenarios where bridging loans are beneficial for their clients, such as resolving chain breaks or facilitating time-sensitive purchases. This heightened awareness is driving professionalism within a sector that, in the past, may not have always been the preferred choice. Within this, the value of partnering with a trusted and experienced packaging partner cannot be overstated. These partners provide critical expertise, ensuring that cases are packaged efficiently and tailored to the nuances of lenders’ criteria.
As the property market braces for the impact of stamp duty changes, and facing an environment where every day counts, the speed and flexibility offered by bridging finance will prove to be an essential tool for intermediaries, homebuyers and property professionals across the UK over the coming months, and beyond.
Donna Francis, Managing Director at Envelop
