Bridging Watch: Tell your clients the glass is half full


It is still early days but most of the housing market seems unaffected by Brexit – so let’s work hard to keep it that way

Since the UK’s decision to leave the EU, the stockmarkets have recovered, the pound has bounced back against the dollar and unemployment remains at its lowest since 2005. In addition, the FTSE 100 is well above pre-Brexit vote levels.

However, the Government has rightly identified housing as one of the greatest challenges facing the country. There is still a shortage, with far fewer homes being built annually than the 250,000 required to meet the 2020 target.

Brexit clearly presents a challenge to the housebuilding industry and this is just one of the reasons why bold leadership is needed to ensure momentum is maintained in the short and long term. So it is promising that the new housing minister, Gavin Barwell, who assumes a key position at a crucial time, realises that, if the Government is to meet its target, it must increase volume and speed up build-out rates.

Sensible lending
Certain bridging lenders have cut back their maximum LTVs by 5-10 per cent. This is no surprise; it is just sensible lending. However, for the majority of lenders it is still very much business as usual.

In the first assessment of the EU referendum, the Bank of England said most companies were not cutting back on investment or hiring. It also reported “no clear evidence” of a slowdown in lending to firms, suggesting the sector was taking the Brexit vote in its stride.

However, recent figures from Hometrack’s UK Cities House Price Index show that London house-price growth is set to slow post-Brexit. Of course, it is still early days and seasonal factors should be considered. And top-end properties in prime central London are most likely to be affected, albeit there has been no more than a 10 per cent initial hit in prices.

Consequently, some lenders are feeling nervous about these high-value single assets, fearing they may dip slightly, as well as the issue of selling them within the 12-month period of a bridge. However, on the whole the rest of the market seems unaffected. We have not seen a rise in down-valuations and valuers have not been asked to revisit valuations, either pre- or post-Brexit.

Shock absorbers
On another positive note, the banks are well prepared to absorb any shocks to the market, compared to the 2008 credit crunch. In addition, as a result of the Brexit vote swap rates have fallen even further. In fact, two-, three-, five- and 10-year swaps are at their lowest recorded levels. This has resulted in the cheapest fixed rates the market has ever seen.

The long-term effect of Brexit is, of course, unknown. However, with bridging lending exceeding £3.6bn and demand for development finance at its highest since before the credit crunch, we must remain positive because history shows that positive talk promotes positive activity.

The industry must therefore continue to work to ensure that confidence and stability are restored. Because financial storms are not inevitable; they can be greatly affected by the country’s overall mood.

Kit Thompson is director of bridging loans at Brightstar