Sunday Times Home

"There is currently a race to the bottom in bridging rates, which is the finance typically used for flipping. Since the last two increases in the base rate, the cost of borrowing among the 150 or so bridging lenders we work with has been slowly edging down. From 75% LTV with 100% works for 0.75% per month to 0.65%. Lenders are also offering more leverage, with Shawbrook Bank going up to 85% LTV. In an effort to capture greater market share and potentially due to the erosion of the value of money, to avoid a downtown in purchasing they are offsetting through allowing higher gearing. So I actually think the market will remain buoyant and, if anything, spur higher traction in the area over the generally preferred "buy and hold model", especially as 'term' lenders are factoring in base rate increases as soon as they can. I'm currently advising portfolio investor clients to consider refocusing their strategies on renovating and selling."

"As mortgage finance becomes more expensive and harder to obtain, we could see an increase in flipping as investors decide buying the property themselves isn't worth it. There may, for example, be a rise in 'forced flippers', buyers who intended to buy the property themselves, but then find mortgage finance too difficult or costly to obtain."

"On the face of it, interest rate rises are a flipping nightmare for everyone trying to make money quickly from property. However, with interest rate rises only the brave or those with sufficient resources can cope with the tighter profit margins. Smaller property flipping firms will struggle as rate rises continue."

"In recent years, the "hobby developer" (whose aim is to add value to flip) has been able to purchase property in a fairly cost-effective way with many run-down properties keenly priced, coupled with lower interest rates. However, higher property values, rising interest rates, the increased stamp duty often required in an additional property purchase, and the rising costs of building material, are making flipping suddenly look a less attractive proposition. The profits are much smaller with many questioning whether it is worth the effort for such little return. Yes, those wishing to "flip" a property may well offer low, but there is such competition from other buyers that low offers are no longer attractive to vendors."

"Canny investors will see money to be made in a property that needs quite a bit of work and may not be mortgageable through a normal high street lender. That means they will have to go to bridging or specialist lenders and if anything we've seen costs go down in that sector of the market. However, the days when investors could simply buy a house, do some pretty basic refurbishments, and it would be worth 10% more in a year are almost certainly over. Though house prices are likely to continue to rise due to supply and demand, the rate of growth is going to slow this year given the cost of living crisis and rising rates."

"Being able to successfully flip a property will come down to the skill and expertise of the investor, not the interest rate. While interest rates are rising, there are plenty of opportunities to flip property, normally where value is added through refurbishment or extensions. Typically, this will involve obtaining a bridging loan as the properties are not mortgageable. Bridging loans will ensure buyers can acquire the property quickly, which is key in this market where demand far outweighs supply. The interest rate available will depend on whether the work required is simply cosmetic or if any structural work will be carried out. Rising building costs and supply chain delays will have a bigger impact on how much profit is made. Of course, there is a higher risk with this strategy but like any investment, the greater the risk, the greater the reward."

"Flipping properties has become increasingly popular lately with many flippers on social media gathering huge amounts of followers. However, with rising property prices, the "bargains" have been few and far between. As rates rise, we will see a gradual reduction in property prices as the market slows and the market will become more attractive for flippers."

"Generally speaking, investors looking to flip properties tend to use short-term finance called bridging. As this is already more expensive than a standard mortgage, its less likely to be impacted by small rate rises. However rising mortgage rates could make some homes more difficult to sell and therefore more likely to accept lower offers from investors looking for a bargain."