As the property market continues to evolve post-Covid, auctions have emerged as a dynamic and increasingly popular route for buyers and investors. Over the past few years, Together has seen a significant rise in auction finance demand, providing 1,632 auction finance loans worth £201.2 million so far in 2024 alone. This represents a notable shift in how properties are bought and sold, with more individuals turning to auctions to secure deals that might not be available through traditional estate agents.
The appeal and growth of Auction Finance
The landscape of property buying at auction has seen profound changes in recent years. One key driver has been the rise of online auctions, which have opened up the market to a wider range of potential buyers. Online platforms allow participants to bid anonymously and in real-time, attracting a new generation of auction-goers who might have previously felt intimidated by the fast-paced and highly competitive bidding wars that once characterised the auction room.
Auction finance plays a crucial role in simplifying the buying process, especially for those looking to move quickly. At its core, auction finance is a short-term loan designed to help buyers complete their property purchases within the tight deadlines set by auction houses—usually 28 days from winning the bid. Then buyers can receive a Decision in Principle (DIP) of how much they will be able to borrow, so they can go into the auction with a clear picture of the budget they have to spend. Unlike traditional mortgages, which can take weeks or even months to arrange, auction finance can be secured swiftly, allowing buyers to act quickly and avoid missing out on desirable properties.
While interest rates for auction finance may be higher than for traditional mortgages, the ability to secure the loan faster is a clear advantage in the competitive auction environment. Once the property is purchased, borrowers can refinance to a longer-term mortgage at a lower rate, giving them the flexibility to manage their finances effectively.
Together’s lending growth in auction finance lending reflects a broader trend in the property market. In 2019, we provided £76.5 million over 638 auction finance loans. By the end of 2023, this had more than doubled to £191.5 million across 1,429 loans—an impressive rise of 150%. This surge demonstrates how buyers are increasingly turning to auction finance to secure properties in a competitive marketplace.
Not all lenders will finance auction purchases, especially if the property is in a poor state of repair. Together’s tailored approach allows investors to access finance for a range of property types, including fixer-uppers that offer significant potential for capital growth.
Spotting the ‘real-life’ regional auction hotspots
What’s more, our data shows that certain regions in the UK are seeing a particular surge in auction activity comparatively. The Northwest, Midlands, and parts of Wales have become particularly attractive due to the lower property prices and regeneration efforts that offer strong potential for growth. Investors are drawn to these areas for buy-to-let opportunities or projects that involve renovating older properties. With property prices continuing to rise in other parts of the country, these regions provide a viable alternative for those seeking high returns on investment.
For example, in 2020, Together provided the quick finance needed to secure customer Christina Dejonge’s first investment property, which was located close to Manchester City’s Etihad Stadium, and was purchased at an online auction.
Just a few short years later, Christina now has 11 properties in her portfolio currently, which she rents out to tenants, all of which are all located across Greater Manchester except for one in Birkenhead in Merseyside. Christina tends to pick properties in areas she knows and having grown up near Moss Side, Manchester, her knowledge of how the rental market works helps to make the most of her investments.
Christina particularly likes the fact that buying property at auction eliminates the chances of being gazumped, bartered with and there being no attachment. With the new digital era, being able to register, log in on the day in the comfort of one’s own space, and be prepared with a Decision in Principle ready, makes it even more exciting.
Scott’s key considerations for potential auction buyers
So, for those considering buying at auction, it’s important to be prepared so you can navigate the auction process successfully:
Research upcoming auctions: Most auction houses list their properties online in advance. Websites such as EIG Property Auctions offer comprehensive catalogues of upcoming lots, helping you identify opportunities ahead of time.
Understand the guide price: Guide prices are often lower than the final sale price, so it’s essential to have a clear idea of your maximum bid before entering the auction.
Review the legal pack: Ensure you’ve reviewed the vendor’s legal pack before bidding, as this contains crucial information about the property and any restrictions or conditions.
Know the payment details: Be prepared to pay a deposit (typically 10%) on the day of the auction, with the remaining balance due within 28 days. Failure to meet this deadline can result in penalties, including losing your deposit.
Choose the right finance: Whether you’re purchasing a property to live in, renovate, or rent out, securing the appropriate finance is essential. Auction finance, bridging loans, or buy-to-let mortgages can offer the flexibility needed to complete your purchase and plan your next steps.
