Property Receivership in 2023: Why lenders must remain hypervigilant


Daniel Richardson - Partner CG&Co

Lenders must remain hypervigilant when it comes to property receivership throughout 2023.

There’s a simple reason why this is the case…

We continue to work through uncharted economic times and lenders owe it to themselves to ensure that they’re consistently in the best position to secure their ongoing and future success.

But, as the last year has highlighted, nothing can be taken for granted.

In December 2021, the Bank of England started increasing interest rates in an attempt to bring stability to the nation’s economy following the Covid 19 emergency, a trend that continued into 2022 as energy prices and the war in Ukraine caused even greater economic turbulence.

The cost of living crisis has been intensifying since – and shows little sign of abating imminently – with energy prices predicted to rise by 20% in April this year.

Indeed, the inflationary shock caused by the pandemic and the ongoing war in Ukraine is now widely expected to persist for longer in the UK than elsewhere.

At the start of January, the Bank of England’s chief economist, Huw Pill, warned that high rates of UK inflation could persist for longer than expected due to the “self-sustaining momentum” of workers demanding higher wages and businesses putting up the price of their products due to increased production costs.

Threadneedle Street had previously forecasted that headline inflation – which was running at 10.7% in November 2022 – will ease from the middle of 2023.

In January, the Office for National Statistics (ONS) also revealed that more than 1.4m households are facing the prospect of a jump in borrowing costs when their fixed-rate mortgages end in 2023.

The majority of fixed-rate mortgages in the UK (57%) coming up for renewal were agreed at interest rates below 2%, the ONS said.

A house price slump now looks more inevitable by the day…

Property industry veteran Harry Hill – the founder of both Rightmove and Countrywide – recently said that if Britain slides into a long recession leading to a continued deterioration in trade and business, house prices could fall by as much as 20%.

Private renters are also facing an increase in their housing costs, with rental prices rising at their highest rate in the UK since records began in 2016.

Consequently, rent arrears cases are likely to rise still further as the cost of living crisis cuts deeper into tenants’ budgets.

This means that buy-to-let landlords will remain increasingly trapped between rising mortgage interest rates and a shortfall in the money owed to them.

It now looks highly probable that 2023 will be a year of difficult adjustment – and that’s precisely why hypervigilance is required.

To state the obvious, lenders must be more cautious than ever about loan-to-value ratios.

I’m aware from speaking to lenders daily that they’ve taken the long view both during the pandemic and in its aftermath by actively working with borrowers who have found themselves struggling financially.

But their patience and forbearance – for obvious reasons – cannot last indefinitely and there’s every reasonable expectation now that we could witness a dramatic increase in repossessions throughout 2023 and beyond.

At the start of 2023, lenders owe it to themselves to work with the most proactive property receivers.

The average time from claim to mortgage repossession for CG&Co’s clients has consistently been far less than the national average throughout 2022 and the preceding pandemic.

We remain committed to the earliest engagement and negotiation with borrowers conducted in the most effective way possible.

CG&Co remains dedicated to achieving this on behalf of our clients in 2023 – and beyond – regardless of what the economy holds in store.