Property Receivership in 2023: What the worsening economy means for lenders – and re-bridge exits


Daniel Richardson - Partner CG&Co

Extreme vigilance is now required by lenders.

The economy is evolving at an unprecedented rate and all the indications are that the current situation is likely to worsen – and the volume of re-bridge exits will radically reduce.

There was scant surprise when it was revealed in September that house prices took yet another tumble in August.

According to the Halifax House Price Index, they had dropped by 4.6% on the year – the largest annual decline in 14 years.

This represented a month-on-month decline of 1.9% – or £5,000 – taking the price of an average home to £279,569.

These stats were also borne out by Nationwide, which said at the start of September that house prices are now 5.3% lower compared to August last year.

The building society said the drop represented a fall of £14,600 on a typical home in the UK since house prices peaked in August 2022.

While there’s no doubt that the property market has proven far more resilient than many expected in the face of rising cost pressures, the effects of surging mortgage rates over the past year are now becoming clear.

Property prices are falling rapidly as a direct result of the cumulative impact of repeated rate rises hitting the property market.

And the problems might be just beginning.

There is always a lag effect where rate increases are concerned, and we may now be about to witness a greater impact from higher mortgage costs flowing through to house prices.

Despite the fact that the Bank of England didn’t increase the base rate from 5.25% in September, persistent inflationary pressures are expected to manifest themselves this winter.

Indeed, many analysts are anticipating further downward pressures on property prices for the rest of 2023 and the first half of 2024.

So, what does everything that’s unfolding mean for lenders?

For a start, there is now the clearest possible risk that loan to values will increasingly struggle to meet outstanding debt figures in the coming months.

For obvious reasons, the best possible underwriting is required and valuers must provide accurate, current and fully-informed figures upon which decisions can be based.

Re-bridge exits are likely to diminish due to the continuing uncertainty concerning these valuations – at least for the time being.

To state the obvious, the need for lenders to scrutinise their loan books more carefully than ever at this point has never been greater.

They need to identify under-performing loans – as well as any defaults – at the earliest possible opportunity and then engage with the borrower promptly and appropriately using specialist and highly-proactive property receivers.

At CG&Co, we’ve always recognised that it’s essential to return funds to lenders in the shortest timescale to ensure that they can relend at rates that are most advantageous to them.

Regardless of what unravels within the economy, we’ve every intention of building on this approach to ensure lenders are consistently placed in pole position for the last quarter of 2023 – and beyond.