When it comes to buying a property UK homebuyers may rely predominately on mortgages and cash payments, but their knowledge towards other financial products is limited, Market Financial Solutions (MFS) has found.
Nearly half (46%) stated they do not have enough knowledge or confidence in finance options other than mortgages to consider using them.
Of those who have bought a property since 2007, 42% identified as cash buyers while a further 52% said they had used a mortgage or remortgage.
Paresh Raja (pictured), chief executive of MFS, said: “Mortgages have long been the go-to method for financing a house purchase in the UK.
“But over the past decade, a range of new alternative finance products has arisen to give buyers different options that might be better suited to their needs.
“However, today’s research demonstrates that there remains a lack of understanding about what these options are and how to use them.
“From crowdfunding platforms to raise a deposit, through to bridging loans to buy a property at auction, there are many opportunities now accessible for those needing to access credit, and to remain reliant on the mortgage market could restrict an individual’s ability to get the funds they need.
“Indeed, in the UK’s competitive property market, it is essential that buyers are aware of the financial products they can choose from, in turn putting themselves in the best position to progress with a purchase quickly and efficiently.”
Nearly one in five (19%) homeowners said they had used a form of alternative finance, ranging from crowdfunding to mezzanine finance and unregulated loans, with this figure rising to 29% among Brits aged between 18 and 34.
Meanwhile, 13% of homebuyers said they had used a bridging loan – this number increased to 21% for those who were investing in a second home.
Deciding on how to finance a property purchase can seem overwhelming given the number of loans and products currently available in the UK. As a result, 37% of homebuyers have relied on a broker to help them find a financial product best suited to their needs.
However, MFS’s research also showed that the reliance on mortgages and cash payments was partly due to a lack of knowledge surrounding other available finance options.
Reflecting the competitive nature of the country’s property market, nearly a quarter (24%) of buyers said they would have liked to have considered other financial products but feared they would lose out on their property purchase if they delayed their credit decision.
Delving into awareness of specific alternative finance products, nearly half (49%) did not have a strong enough understanding of bridging loans or the situations in which they can be used.