Looking Forward to 2024
By David Craik
As the clink of the New Year champagne glasses fades it is customary to not only look to the future but to reflect on the year just gone.
Bridging Loan Directory gathered the thoughts of industry experts as they get set for 2024.
Daniel Yeo, Managing Director, Specialist Finance Centre
“2023 was a tough and challenging year but I am proud of the way both we and the wider industry has persevered.
Bridging has been a strong product line for us, and we have had a resurgence in commercial applications.
Second charge mortgages have been through the mill a bit, but stability has crept back in, and a perfect storm, including the recent rate decreases and new entrants coming to the market, has brewed to make this product very exciting for 2024.
Thinking more on the new year, from a regulatory perspective, we are likely to hear from the Financial Conduct Authority on their extensive information request for second charges by the end of the first quarter.
I believe the industry will have to make significant changes to advice provisions and potentially adjust their fair value assessments.
As the cost of funding decreases at a time when recession threatens us, lenders will have a great chance to play a vital role in increasing borrower confidence with continued rate drops in an attempt to gain market share. This, combined with criteria enhancements is just the tonic we need.
The government will have to do their best to influence reduction in the base rate, implement measures to assist the many mortgage prisoners, provide relief / mortgage payment subsidies for the most vulnerable and allow mortgage payments to be deducted at source.
From an SFC perspective we are steadfast in our pursuit of becoming the leading B2B master broker in the specialist space.
We will continue to grow our employed and self-employed divisions and our academy program for trainees will be looking for new blood.”
James Bloom, Director, Alternative Bridging Corporation
“When we analyse the conversations with all our clients, as well as brokers and other industry professionals, it’s clear that 2023 will not go down in the annals of history as a vintage year for the property market.
With high inflation, the cost-of-living crisis and borrowing costs continuing to rise through the first three-quarters of the year, affordability was a real issue for those looking for property finance, as well as those making repayments on their loans.
Many commentators believe we have hit the ceiling as far as the Bank Rate goes and understandably this is music to the ears of property professionals. That said, this could be wishful thinking as we really don’t know what the interest rate environment is going to look like in 2024.
While the US Federal Reserve has signalled that it expects to lower interest rates three times in 2024, the Bank of England said in December that it expects our rates to stay at high levels for “sufficiently long” to tackle inflation and get it back to the government’s 2% target. In other words, don’t expect us to follow the US.
It’s unlikely that the market – or the economy as a whole – is going to significantly improve in 2024; therefore, those property investors who have weathered the storm in 2023 would be well advised to continue with their same strategy.
Over the past year, landlords have been looking towards higher yielding assets – for example, holiday lets, HMOs, semi-commercial – and these areas are expected to remain relatively strong over the next 12 months.
At Alternative Bridging Corporation, property finance is our raison d’être. We adapt with the times and look to provide products that suit investors in the current market conditions.
That’s why we’ve just launched our new Alternative Term Loan, which lets borrowers take out a loan for longer than a bridge, knowing that they can move quickly and without penalty to a longer-term product.
That’s because there are no Early Repayment Charges (ERCs). When no one knows right now which way interest rates are going to go in 2024, we want to offer flexibility so they can quickly adapt when the market changes.
While the next 12 months probably won’t be the easiest ones for property investors, there’s no need for doom and gloom.
A sensible strategy, coupled with the right products from forward-thinking lenders such as Alternative Bridging Corporation, should allow borrowers to make the most of opportunities as and when they arise.”
Richard Armstrong, Chief Commercial Officer, StreamBank
“We received our full banking licence back in February which allowed us to offer regulated bridging alongside our existing offerings of non-regulated bridging and development finance.
On the regulated side we seemed to get traction within the market both very quickly and easily after we started offering it in the middle of 2023.
We were helped by a few players exiting the regulated market and being the new kid on the block. But being able to provide great customer service, the right finance package for the customer, and strong valuation, application and underwriting processes were the biggest factor in allowing us to grow.
Regulated has been a predominant driver of our overall business. Indeed, we are on track to beat our target of having a £120million loan book by the end of March 2024. At the end of 2023, we had already written over £100million of new loans.
We are still seeing demand for both unregulated and commercial, but those deals are taking longer to seep through.
From a consumer point of view, we have seen a lot of demand for chain break finance given the rise in interest rates and uncertainty in the residential property market. Bridging in this environment has been seen as more of a go to finance product than before.
Even though we are seeing more stable interest rates which will lead to a quicker flow in the housing market in 2024, bridging will still be seen as a crucial fall-back product if deals do not go smoothly.
We have seen more interest and enquiries in development finance in the second half of the year. For the last couple of years housing developers have sat on bits of land and planning because they have been a little wary of building costs.
We have also seen the retail sector, in particular, tighten up as it was more difficult to get units filled at the pre-building stage.
In 2024 I expect a smoother market. We will see flat market pricing which will allow clients to have a more stable viewpoint rather than having to second-guess whether prices and costs will rise or fall.
I also see more certainty around building costs which will lead to a better movement in the housing market.
For ourselves we want to keep building our reputation and our loan book. With bridging we have only scratched the surface.”
Stephen Burns, Operations Director, AFIG
“2023 was an odd year. It was one where it almost became acceptable to be not as good. It may be a post-Covid effect, but I felt that valuers, lawyers and lenders were a little bit slower than they have been previously.
A number of lenders seemed to find it easier to say no rather than fighting to say yes. Our industry needs to be timely and punchy to keep ticking along, yet transactions dragged regularly.
From our side we created AFIG in the Spring which has gone really well. It’s been a great year building new relationships and maintaining strong existing connections whilst still retaining strong service, as Adapt is renowned for.
We have always been generally focused on residential, but we are doing much more development now. It is no longer the odd commercial and retail for us anymore. We are more diverse.
I see more interest from investors in commercial development. The easy investment was always residential but now investors are looking for better margins in smaller scale commercial developments. They are trying to make their money work for them in a wider range of assets.
In addition to AFIG, we launched AFIG Partners, which is our introducer arm where we reach out to introducers to help them complete work and offer services to their clients.
It was a soft launch, and it is still in its first quarter. But we hope to hit the market a bit more with the service in 2024.
In terms of 2024 I think that with a little bit of help from the Bank of England we will see more stability. Investors are already learning to work with this new higher rate environment.
The shock has calmed down a bit. It is what it is! You have to have a positive attitude!”