Honey, let's shrink the house

Honey, let's shrink the house

Alastair Hazell - Banking Director
Downsizing And Bridging Final

BRIDGING LOANS have all-but disappeared from most banks, but at Hampden & Co we still provide them, recognising the key role they play for many families – and, unlike many online brokers, we provide reasonable terms. Alastair Hazell reveals the growing demand for downsizing finance

Jonathan Lockwood Huie, a Silicon Valley techie turned self-help author, puts it rather well: “Anything that costs you more hours of effort or worry than it brings you hours of enjoyment is a candidate for downsizing.” And increasing numbers of people are taking his advice – by moving to a smaller home.

A swathe of research over the past 12 months demonstrates that this is a growing trend, although the underlying reasons haven’t changed significantly – particularly in higher property price brackets. The ‘empty nest’ factor is of course a big driver. Parents are rattling around in a big house with a large garden after the kids have left home. They want to move to somewhere that’s easier to look after and possibly free-up some of the equity in their house to help their children, put into savings or buy a holiday home.

And even if children aren’t part of the equation, there comes a time in life for many of us when downsizing seems like a very good option. After all, how many bedrooms or how big a garden does a person necessarily need when their priorities in life begin to change?

The challenge then is to successfully switch properties which, as we all know, is rarely as straightforward as it’s made to appear in those aspirational Channel 4 property shows. For instance, what if the perfect new home comes up before you’re able to sell the existing one? Or what if you don’t want to risk the sale of your existing home until the keys to your new property are safely in the grasp of your legally entitled hands. And if you’re looking for property some distance away – perhaps so that you can be closer to family or friends – questions such as these become all the more pertinent.

Those were the days

It used to be easier. If you’re of a similar vintage to me, you’ll recall that there used to be something you could arrange with mainstream banks to finance, at a reasonable rate, a new property while you set about selling the old one. It’s called a bridging loan. However, walk into a high street bank today to ask for a bridging loan and, not only are they almost certain to say ‘no’, but they probably wouldn’t even understand the question.

Of course, if you bash ‘bridging loans’ into Google, you will still find them, however, online brokers may be charging say 1.5% per month plus an additional percentage on the way in and a further percentage on the way out, and it doesn’t take long for that to compound into pretty scary levels of APR.

Open-ended loans

We like to be a lot more helpful at Hampden & Co. Indeed, I’ve recently worked with two new clients to arrange open-ended bridging loans, which are very hard to come by these days.

In both cases, I was introduced by wealth managers who explained that their clients didn’t really know anyone at their existing banks and required some personal support tailored to their specific circumstances. Not only were we able to help but we were able to do so on attractive terms.

As we all know, the population of the UK is ageing, so I suspect demand for these types of loans will continue to grow, particularly as property pricing pressure means that families look for creative ways to support one another on the property ladder (for more on this, see my colleague Samantha Dunne’s recent piece about guarantor mortgages).

We’re also seeing a number of referrals from professional advisers who know they can trust us to assist their clients, appreciate that our rates are fair and are also aware that, unlike other private banks, we won’t seek to manage funds for their clients because that’s not what we do.

We also take pride in being flexible, and looking at every situation on its unique merits and provide a speedy response. I wouldn’t go so far as to say that we also help clients mow their expansive lawns until their downsizing is complete but, if it’s their wish, we can certainly help them move somewhere that will require a lighter touch with the garden shears.

Please do remember that all borrowing is subject to status and is available to persons of 18 or over. Security might be required for borrowing in the form of a charge or standard security over land, or other forms of security over your investments or other assets. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.