It’s 10 years since Lehman Brothers filed for bankruptcy and staff were filmed leaving its Canary Wharf HQ holding cardboard boxes.
And it’s 11 years (hard to believe, I know) since queues started to form outside Northern Rock branches around the UK. Both are images that came to symbolise the Global Financial Crisis.
Now not for a minute do I think that Brexit, even the teak hard version that we may end up with, is going to be anywhere near as serious as events were back then. But at the same time it is starting to feel like there could be a fair bit of turbulence in the years ahead as we exit the EU. Negotiations are not exactly going smoothly.
Aside from the broader political uncertainty that’s creating caution among businesses and consumers alike, the inflation caused by the collapse of Sterling post-EU Referendum result has been especially pernicious— all the more so with negligible wage growth adding to the squeeze on household finances.
Add in concerns about rate rises and an economy that, at best, can be described as lethargic, and it’s no surprise the property market is starting to feel the pain. Transaction levels and prices are down, especially in prime central London, while properties anywhere won’t shift unless unless they’re competitively priced.
It’s hard to see things changing, either, until the cost of living falls and there’s significantly more clarity on the direction of the economy. But against this uncertain backdrop, with its multiplicity of economic and political variables, it’s not just borrowers who will lose confidence but lenders and their funders, too.
Indeed, the potential impact of Brexit on bridging lenders is something brokers need to have firmly on their radars as they negotiate the year or two ahead. It could ask tough questions of the industry.
Now it goes without saying that as we enter the business end of Brexit, brokers will naturally be more selective about the lenders they choose.
Strength of funding lines is the obvious place to start when assessing a lender’s ability to ride out the potential economic storm ahead, as is a lender’s track record on risk. After all, bad lending decisions could rise to the surface rapidly if conditions start to deteriorate as Brexit plays out.
Brokers should pay attention to time in market, too. And by that I don’t mean how long a lender has been operating, because that counts for nothing when a downturn starts to bite.
What’s far more important is the time in market of the key people in an individual lender – specifically whether they have been through tough market conditions before and, if so, how they performed.
If the worst case scenario happens, and Brexit really does put the UK economy and property market on the ropes, brokers will want to know they’re dealing with a team of people who have been there and kept lending in the past — whatever the market threw at them.
Mark Posniak is managing director of Octane Capital