Allica Bank has announced an expansion of its residential Automated Valuation Model (AVM) bridging proposition, significantly impacting the mortgage market. The bank has raised the maximum loan-to-value (LTV) ratio from 70% to 75% and increased the maximum loan size from £750,000 to £2 million, allowing for larger residential bridging cases.
How Does This Change Affect Borrowers?
With the increase in the maximum LTV to 75%, borrowers can now secure a higher percentage of their property’s value in bridging finance. This is particularly beneficial for those looking to make below-market-value purchases, as these can be financed up to 90% of the purchase price. The introduction of title indemnity insurance as a standard alternative to full legal work also streamlines the process, making it more accessible for borrowers.
What Should Brokers Know About This Update?
Brokers should be aware that the changes allow them to offer clients more flexible financing options. The higher loan limits and LTV ratios can cater to a broader range of clients, particularly those involved in larger property transactions. This could lead to increased business opportunities as borrowers seek to take advantage of the enhanced offerings.
What This Means for the Mortgage Market
Investors in the property market can use these new terms to finance larger acquisitions or renovations. The ability to access up to £2 million at a 75% LTV opens up more significant investment opportunities, potentially leading to higher returns. As the mortgage market evolves, keeping an eye on similar offerings from other lenders could be beneficial.
Frequently asked questions
What is an AVM and how does it work?
An Automated Valuation Model (AVM) uses technology and data analysis to estimate property values quickly, helping lenders assess risk without a full appraisal.
Are there any fees associated with these new bridging loans?
While specific fees may vary, Allica Bank has recently dropped arrangement fees on commercial mortgages of £750,000 and above, indicating a trend towards more competitive pricing.