There is a lot of negativity around the economy at the moment, in particular the housing market. Outside the UK there is an impression the country is in disarray, but it is proving far more resilient than the headlines would have us believe. So let’s get back to what we do best and focus on lending.
Gross mortgage lending figures from the Council of Mortgage Lenders were up by 12 per cent in 2016, at £246bn: the highest since 2008. Meanwhile, the Bank of England’s latest secured loan figures show lending up by another £3.8bn in December.
Also, the Office for National Statistics found that the UK economy grew more than expected in Q4. GDP increased by 0.6 per cent, defying predictions of a slowdown and ahead by 2.2 per cent over Q4 2015.
The same appears true of the bridging market, with the latest Bridging Trends data showing an 11.5 per cent rise in loans compared to 2015.
So the doomsayers predicting an economic meltdown in the face of Brexit have yet to be proved correct. For those of us involved in lending and housing, the best approach has to be to keep our heads down and get on with it.
The cost of the onerous 3 per cent extra stamp duty on second homes is typically passed on through either higher rents or a higher sale price – neither of which, I am sure, was intended by the chancellor. However, with HM Revenue & Customs figures showing the Government made £519m from the surcharge last year, I am fairly sure this tax will not be abolished any time soon.
In general, buy-to-let is the one area to have experienced a decline in lending; and this is before the changes in tax relief start to take effect. Bridging is a key source of finance for buy-to-let purchase and refurbishment, as well as change-of-use schemes, so any further measures to reduce the scale of the market will undoubtedly have an impact.
Anything that looks like it will affect the bridging market will affect bridging lenders reliant on institutional funding. Particularly at risk are those whose funding comes from outside the UK.
While the low pound means funding will cost less, negative press about the potential effects of Brexit will make those around the world feel nervous.
Lenders with their own funding will be in the strongest position this year. Brokers placing business with principal lenders will have a higher level of certainty that any decision in principle will indeed mean they will have the funds.
One lesson we can take from the controversial new US president is to focus on our own economy and businesses. As a nation that exports 27 per cent of our GDP, trade barriers will always be an issue. Brexit notwithstanding, we need as many friends as we can get.
Even though we all hate much of what Trump comes out with, the US remains the country we export the most to, accounting for £4.4bn or 15 per cent. We are in a better position with the US now than we have been in the past eight years, so various attempts to stop Trump coming to the UK can only be counter-productive.
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