The countdown to Britain’s departure from the European Union seems to be accelerating all the time. With just a few weeks until the official Brexit date arrives, we’re still no closer to knowing exactly what the future holds for Great Britain.
But how has this uncertainty affected bridging loans? Has the bridging finance industry seen any specific shifts of fluctuations? Or is it simply business as usual for bridging loan borrowers and bridging loan rates?
The extent to which Brexit could affect bridging loan applications and bridging loan rates will be largely determined by alterations to the Bank of England base rate.
Analysts and economists widely expect a rise in interest rates in the event that United Kingdom exits the EU without a deal at the end of March. No base rate hikes have been officially planned until next year at the earliest, but it may be necessary for the Bank of England to defend the pound with an increase in the event of a no-deal departure.
However, this is all speculative – given the ferocious efforts from all sides to prevent a no-deal scenario from happening.
At the same time, some believe that even in the event of a no-deal Brexit, it may become necessary to reduce rates and simplify borrowing rules in and around the housing market. Measures necessary to encourage investment and keep the market ticking over through turbulent times. So while logic appears to point to an inevitable rise in base rates, nothing is certain as things stand today.
Increase in borrower interest
As is the case with all aspects of Brexit, we’re therefore still sitting somewhat impatiently in the dark. To make any wide-reaching predictions when nobody really knows how things will pan would be irresponsible. But what can be said with certainty is that in terms of bridging loans, more investors and borrowers in general are applying for bridging loans than ever before.
Over the past 10 years, the value of the alternative finance market in the United Kingdom has exploded like never before. Large and small developers alike have shown growing preference to the specialist lending market – bridging loans and development finance in particular having garnered impressive interest. The result of which has been the introduction of dozens of new specialist lenders, intensifying competition and improving both accessibility and affordability.
Despite the negative effects of Brexit on the UK’s property market, there has been a notable increase in short-term lending since the referendum. According to the latest figures, annual bridging loan completions have hit £3.98bn for the first time. In addition, Q4 2018 showed improvement of more than 21% compared to the same period in 2017. This would seem to suggest that the on-going uncertainty regarding Brexit hasn’t dampened Britain’s appetite for intelligent alternative financial services.
Still, it remains to be seen if such confidence continues, or is adversely affected by the outcome or Britain’s departure from the EU. Which, for the time-being at least, still isn’t even guaranteed to happen at all.