Fears for funding of mortgage lending should banks leave UK

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Should major banks move operations out of the UK, it could have a major detrimental impact on the future of residential mortgage lending, according to an industry expert.

Over the weekend, the British Bankers Association chief executive Anthony Browne (pictured) wrote in the Observer that most international banks are now “working out which operations they need to move to ensure they can continue serving customers” and that their “hands are quivering over the relocate button.”

He added that smaller banks plan to start relocating before Christmas, while larger banks are expected to begin the process early next year.

Association of Mortgage Intermediaries chief executive Robert Sinclair says that limits on trade borders with the EU would have a knock-on impact on the mortgage industry.

“The need for UK banks to be able to trade cross border within Europe without limitation has been a fundamental support to the UK economy for many years,” says Sinclair.

“Whilst we doubt banks will leave the UK entirely, significant aspects of their operations could well do so.

“The ability to trade capital, funding, swap and derivative products supports the wider world economy as well as our own.

“Any threat to this risks limiting the ability of our largest UK Banks to support the domestic economy in the same way. “

While we are as yet unsure whether a hard Brexit will take place, Sinclair says we “cannot ignore the fact that changes to how these major banks operate has the potential to restrict the future funding of UK residential mortgage lending.”

However, National Association of Commercial Finance Brokers chief executive Adam Tyler, believes the bridging sector would be resilient in the case of banks moving their operations out of the UK.

 “Bridging is a specialist sector that operates relatively independently of the major banking institutions,” he says. “If anything, the departure of big name banks could thrust alternative finance even further into the spotlight. 

“It’s worth noting that the current bridging industry grew out of the ashes of the global financial crisis when many mainstream banks effectively shut up shop.

“In other words, any uncertainty on the high street often benefits the bridging sector as it becomes more visible and demand from borrowers increases.

He predicts that a lot of the speculation around the future of the banking industry post-Brexit, “will remain exactly that.”