"Looking forward, we can expect an increasingly competitive lending landscape which will inevitably benefit borrowers in the form of better rates and possibly lower fees but ongoing affordability concerns will continue to temper volume"
- Donna Wells - Envelop
The past few years have certainly been harder to predict than many of their predecessors. While it takes a brave person to put their head on the chopping block in terms of placing some hard and fast numbers on lending volumes or potential house price movement, there have been plenty of indicators over the back end of 2023 to offer some insight into expectations for 2024.
However if we’ve learned anything over the past few years, it’s to expect the unexpected.
In terms of the recent Autumn Statement, there were few surprises for the housing market other than a slight change to the Permitted Development rights on converting a house into two apartments, providing there are no changes in the appearance of its exterior.
As we get closer to the general election, let’s hope that the Spring budget will generate more opportunities for property investors.
Staying with the housing market, I expect this to continue stalling somewhat as the Bank of England base rate is not widely expected to fall with any great urgency and whilst inflation levels are lessoning, they are not decreasing quickly enough to have the desired impact on consumer spending.
In a similar vein, while mortgage rates are slowly falling, they are unlikely to reach anywhere near the levels borrowers became accustomed to, a factor which will inevitably continue to impact mortgage approval rates.
This is also a combination which may have some property professionals and investors rubbing their hands together amidst the opportunity to snap up properties for below-market value. This may come in the form of larger portfolio landlords operating from more robust and tax-efficient limited company structures who are looking to bolster their portfolios and/or divest into alternative property types.
Especially if they have access to specialist advice, support and clearer avenues to a range of alternative products, such as bridging finance, which will allow for swifter transactions and greater flexibility to take advantage of these opportunities as they arise.
Commercial development and warehousing will continue as the demand for ‘click and deliver’ and ‘click and collect’ remains strong with retailers embracing this as part of the distribution strategy.
Generally speaking, demand across the specialist lending marketplace will increase due to the continued tightening of high-street/mainstream underwriting in the wake of cost of living pressures. I also believe that the wholesale market will continue to drop as Sonia swops will react in line with BoE changes, given the flexibility in the market sector and appetite for lending.
It was also interesting to see recent data emerge from Ernst & Young LLP which outlined that net unsecured lending is forecast to rise 6.1% in 2023, which is the strongest growth since 2017, in part driven by a fall in repayments in recent months.
The EY ITEM Club predicts unsecured lending growth will slow to 5% in 2024 and 4.3% in 2025 which may fuel secured borrowing over the next 12 months.
Looking forward, we can expect an increasingly competitive lending landscape which will inevitably benefit borrowers in the form of better rates and possibly lower fees but ongoing affordability concerns will continue to temper volume.
With increasingly complex borrowing needs evident in 2024, an even greater reliance will fall on the shoulder of the specialist lending marketplace to meet the growing high-street lending gaps.
The value of the advice process will also rise in line with these expectations, as will the reliance on trusted specialist packaging partners to deliver a range of alternative solutions to meet these ever-shifting challenges and demands.
