Why a guaranteed option has never been so important to brokers and borrowers

Uncertainty. A word we are all far too familiar with now. Over the past few years, uncertainty has been used on a regular basis, whether associated with Brexit, Covid-19, or during other periods. However, the uncertainty we are facing in the current economic climate has once again presented a challenge for lenders, brokers and borrowers alike to overcome.

With inflation returning to a 40-year high and the Bank of England expecting to increase rates further, many lenders in the bridging market have had no choice but to introduce variable rate bridges and pull their products from the market.

This of course has subsequently created a problem for brokers to deliver competitive and affordable options to their clients.

Owing to the current economic climate, many borrowers are demanding the comfort that their loan rates are fixed for the term of their loan. There are many advantages to having a fixed rate, including:

Protection: Certainty is not only important to lender, but just as important for borrowers, if not more so. For most investors and developers, borrowing money is a means to an end. Borrowing at a fixed rate means one less thing to worry about and profit margins can be protected.

Budgeting: A key advantage for a borrower is that once they have locked a rate in, they will know how much needs to be repaid over the course of their term. Therefore, as the amount of interest charged doesn’t alter throughout the length of the introductory rates period, their repayments will remain the same, even if interest rates suddenly spike.

Capitalise on low interest rates: With it looking like interest rates are only going to continue to rise, taking out a loan at the time when they are lower, means the borrower will be able to lock in a cheaper rate for a period of time, which could reduce the overall cost of their loan.

Taking the above into consideration, to ensure borrowers could continue to maximise investment opportunities, we made the decision to avoid introducing variable rates and instead, introduce the Hope Guarantee. The Hope Guarantee provides broker’s clients with much needed security. This involves borrower’s rates being fixed for the term of their loan, as soon as Hope Capital’s solicitors have been instructed providing there are no material changes to the application or loan, regardless of increases in the Bank of England base rate which are expected in the coming weeks/months.

With there being so much uncertainty in the current economic climate, having an option like the Hope Guarantee ensures borrowers can continue to borrow with confidence, which is just what is needed at a time when living costs are being squeezed.

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