"So next year, expect to see a tighter market, more competition, flatter property prices and ultimately flatter lending than we have seen this year both in bridging and in the mortgage market."
Against this backdrop both the wider mortgage market and the bridging market has done well this year, with both rising steadily.
Next year there will undoubtedly be more uncertainty, especially around the end of March, if indeed Article 50 is triggered then. It doesn’t look as if the remaining EU countries are going to give the UK an easy ride, so there is likely to be a level of uncertainty for the next two years at least.
The CML recently revised down its forecasts for growth for next year, and similarly I think that the bridging market will hold steady to this year with no great growth.
What we may see over the next couple of years however is a shift in the shape of the bridging industry. Many larger firms are funded by overseas investors who may well get nervous of their investments in the UK property market. Immediately after the referendum we already saw some bridging lenders have their funding lines pulled. This resulted in a big uptick in business for self funded firms such as Hope Capital, which brokers could rely on to have the funds and to lend when they said they would. This pattern could well be repeated over the next few years ultimately changing the shape of the bridging market to the extent where we see that self funded lenders are in a much stronger position and ultimately play a far larger part in the bridging industry.
The biggest impact to both long and short term loans next year is not likely to be Brexit however, but rather the changes to the buy-to-let market. The combination of the extra 3% stamp duty, the forthcoming tax changes for landlords and any new measures that the PRA may bring in, is likely to dampen and suppress the buy-to-let market as we have known it. While it is intended that first time buyers and home movers will take advantage of fewer property investors, the new regulations must be careful of dissuading developers from refurbishing properties that will provide more or better housing as this will be self defeating.
Any slow down in borrowers looking for bridging finance will naturally result in increased competition which could well drive down bridging rates. It may also lead to some lenders diversifying into longer lending terms or different types of short term loan.
So next year, expect to see a tighter market, more competition, flatter property prices and ultimately flatter lending than we have seen this year both in bridging and in the mortgage market. This is likely to be against a background of short term fluctuations as the markets respond to different announcements regarding Donald Trump’s appointment as president and EU/UK game playing.
