Bridging lenders positivity surges as uncertainty around Brexit negotiations slows

The latest sentiment survey from ASTL lender members reveals confidence around the prospects for their businesses and the UK economy has risen significantly whilst the worry surrounding the outcome of Brexit negotiations has lessened. ¹

Members are much more optimistic about the long-term prospects of the UK economy. Positivity has now increased from 43% in June to 50%. Just 20% of members are not feeling confident about the long-term prospects, which has dropped significantly from the 34% that had no confidence in June.

Lenders are particularly positive about the outlook for their own businesses, 75% believe that volumes will grow over the next six months. This confident outlook was also shown in the results as none of the lenders expect business to fall off over the next few months. If this forecast turns into reality, then in turn the whole bridging sector will grow substantially. Over half (51%) of members expect growth in the sector to increase, a significant rise from the post Brexit results in 2016 when just 19% of lenders forecast growth. Additionally, 50% expect an increase in competition in the sector, the lowest figure seen since November 2016.

Almost half of members (48%) believe the measures proposed in the recent Budget statement could have a significant impact on the housing market, but are remaining sceptical until the Government delivers on these reforms.

Almost half (46%) of members expressed their concern for the outcome of Brexit negotiations, which has dropped significantly compared to the 64% of members that were concerned in June. Almost a third of members (29%) stated that they are not worried about the outcome of the negotiations, which has increased noticeably from the 21% that expressed this in June.

Benson Hersch, CEO of the ASTL, says: “Whilst there is of course still some caution around Brexit, lenders’ confidence for their businesses and the UK economy continues to grow significantly. In addition, the measures announced in the Budget are likely to have a positive impact on the housing market, although it remains to be seen whether they will actually be implemented in 2018. We hope to see this positive attitude and potential growth in the sector remaining high whilst worry over political uncertainty and its impact continues to decline.

 

Press Release January 2018

The housing crisis – the long road to a solution

The interest rate rise from the Bank of England was a first for many homeowners who have never experienced one before. Naturally they will be concerned about what it means for them in terms of their home loan and ability to borrow in the future. But what will this rate rise actually mean in reality for these borrowers? More importantly what needs to be done to better stimulate the housing market?

So far, evidence suggests that the impact on the market will be limited. Those borrowers who have come to the end of fixed contracts may well find that rates are unchanged or even lower than they are currently paying. First time buyers continue to face challenges in making that first step on the ladder, however the proportion of this group taking out a mortgage is rising compared to other areas of the market. From the perspective of bridging lenders, they are unlikely to change their pricing structure, but will look carefully at how the market reacts over the long term, as they need to assess the viability of refinance exit routes.

Looking ahead to the Budget announcement later this month, potential solutions to the current housing crisis are expected to dominate. With the government under pressure to do more to stimulate the economy, consumers and the property industry alike are waiting to see whether the speculation will become reality. There have been rumours that Hammond could reduce the lower level rates of Stamp Duty Land Tax (SDLT) in England, in a further attempt to widen the party’s vote share and appeal to first time buyers. It will be interesting to see what the Welsh and Scottish legislators decide to do. Currently SDLT puts some people off moving to new jobs and keeps homebuyers living in houses that are far too large for their needs.

Another topic expected to dominate is borrowing to build, Sajid Javid, the Secretary of State for Communities and Local Government, recently indicated that the Government will announce a significant investment in housing. Javid said that the UK should “absolutely be considering it” by taking advantage of “record-low” interest rates for the purpose of increased borrowing.

Whether any of these measures will come to fruition remains to be seen but, with just weeks to go until the Budget, we will wait in anticipation.

Benson Hersch, CEO of the ASTL

A version of this article appeared in the November 2017 edition of Specialist Lending Solutions Alert

 

How are we doing?

A few weeks ago a survey by the FCA, entitled “Understanding the financial lives of UK adults” landed on my desk. In her foreword, Jo Hill stated that “Understanding consumer needs is a key factor in the way we make regulatory judgements.” The survey follows the publication of “Our Mission 2017” by the FCA in April.

As much of the grey areas of compliance require the finance provider to act in a reasonable manner and the FCA is reluctant to give definitive guidance as to what “reasonable” means, it’s important to try to understand the regulator’s mind-set.

I’ve picked up some data which I think is of interest.

18-24 year olds are the least confident about managing their money and the least knowledgeable about financial matters compared with other age groups. In the age of increasing use of the internet to make financial decisions, this is worrying given in the future people will need to be more financially astute. Interestingly, only 36% are currently happy to get advice online. 44% do not have confidence in the financial service industry and thus opt for the recognised mainstream providers. This makes the role and integrity of brokers essential in ensuring that the choices made are the best possible.

What is also worrying is that this age group tend to use credit card facilities to tide them over. In addition, many student loans are not yet repayable. The interest rate on these loans is high. This will affect them adversely if they are seeking mortgage finance later.

25-34 year olds are most likely to be in financial difficulty (13%) and t be over-indebted (23%) in comparison to other age groups. Housing (un)affordability issues have led to Generation Rent. Only 42% own a home, despite the fact that 59% are co-habiting.

Credit card debt (44% have a revolving balance) and student loans are significant financial issues for this age group 35% are just about surviving.

This group are most likely to use online advice and use technology and generally distrust financial services companies. 35-44 year olds are big holders of life and health-related financial products. They have higher than average household income (£56,000 compared to £46,000 for all UK adults) but 21% are over-indebted with 31% just surviving. For many, the mortgage is the dominant financial issue with 56% having a residential mortgage. There are signs of financial pressure, especially with the prospect of increased interest rates. The survey shows that 13% would struggle with an increase of up to £100. Scarily, 52% of renters would find difficulty coping with a similar increase.

This group are more focussed on current financial needs, with family their main priority.

45-54 year olds have fairly similar financial profiles to 35-44 year old group. However, for many, financial pressures are starting to ease. For those who have a mortgage, mean LTV has fallen to 37% compared to 55%.

There is, however, a different story for some in this age group, with 16% over-indebted and 25% just surviving. The same picture is shown by the fact that 22% own their home outright but 15% have an interest-only mortgage,. In addition, only 35% have given much thought to how they will manage financially when they retire.

55-64 year olds are more aware of retirement, although many now plan to work either full-time or part-time beyond the traditional retirement age of 65.

Interestingly, 31% have more than two adults over 18 living in their household. These could be elderly parents or adult children who have shown no inclination to flee the nest.

53% of this group own their home outright, with 25% having a residential mortgage. Confidence in the UK financial services sector continues to decrease with age and people also become more risk-averse.

65 year olds and older constitute 22% of all UK adults. This proportion is forecast to grow. Most (86%) are retired and living off pensions and savings, 83% have no unsecured debt. They are confident managing their money. 78% own their home and only 1% are in financial difficulty (18% are just surviving). Increasing life expectancy is a boon for some, but others are worried about the cost of care. Additionally, 29% are worried that they may not have enough money to last for their lifetime. Wealth is concentrated, with 24% having savings of £50,000 or more and 39% having savings of less than £20,000 or nothing at all.

The above is just a tiny snapshot of some of the findings. Lenders need to assess the vulnerability of potential borrowers as well as the likelihood of them falling into financial difficulty. It’s clear that, despite the growth of financial information on the internet, most still prefer to deal with humans. This reinforces the continued need for knowledgeable and ethical advisers.

Benson Hersch, CEO of the ASTL

A version of this article appeared in the December 2017 edition of Bridging Introducer

 

 

ASTL members continue to face positive growth despite period of uncertainty

Figures compiled by the ASTL's auditors from its bridging lender members for Q3 2017 have painted a vivid picture of the sector. While the value of loans written for the quarter ending 30 September 2017 showed a slight drop compared with Q2 2017, there has been no slowdown over the last 12 months, with the annual figure rising by 16.1% to £3.2 billion. In comparison to the same quarter last year, the value of loans written in the quarter has increased by a massive 38.9%.

The size of members' loan books is also healthy. Total loan books are continuing to climb, with a rise of 8.3% compared to Q2 2017. Compared to the end of Q2 2016, the value of loan books has risen by 27.7%, to £3.5 billion. 

The quarter saw the pace of increases in applications decrease marginally (0.7%) compared to Q2 2017, however applications are up a huge 45.5% compared to the same quarter last year, while those on an annualised basis are up 63.9% on the year ended September 2016; making up a total of £18.9 billion. 

Our figures show that the bridging finance industry is in good shape going into 2018, despite the challenges to the British economy and the squeeze on affordability and access to consumer credit. 

Benson Hersch, CEO of the ASTL says: "The figures from our members show that the bridging finance industry is in excellent shape. It shows that the industry has remained resilient despite the threat of Brexit and low growth in the economy.

The figures also demonstrate that bridging loans remain an excellent alternative where traditional financing is not immediately available for customers. The bridging sector therefore continues to provide a vital role in the economy by offering customers access to the capital they need in a responsible and sustainable way." 

These figures are taken from the responses from ASTL members, which include most of the key lenders in the bridging market.

Annual figures (£)

Press Release, Wednesday 8 November, 2017