There were likely many people waiting with unease ahead of Jeremy Hunt’s Autumn Statement.
Indeed, his budget was heavily laden with tax rises and spending cuts. However, there was little of direct consequence for those in the short-term finance market.
Nevertheless, a few factors are likely to have an effect on mainstream mortgages, and therefore on bridging.
Remember our ongoing strength and stability
First is the March 2025 end date for the stamp duty reduction. This is unlikely to cause the chaos that emerged with the holiday during the pandemic. However, it will probably motivate some to move sooner and to turn to bridging for help securing a saving in the long run.
Perhaps this will counterbalance a slowdown in the purchase market, caused by the rise in both living costs and mortgage rates.
The reductions in the tax-free allowance for capital gains tax are drastic and will have a lot of property investors both considering selling up now before the changes come in and looking at the long-term viability of this market.
An influx of properties may sound good to buyers, but renters should be wary of another limitation being placed on landlords because a decreased supply of rental properties will result in higher rents.
Strains on processes
For bridging, a healthy purchase market stimulated by these kinds of movement in the short term is positive, but we should be wary of extra strains on processes.
Those offering products such as bridge-to-let may also see their client base hit as many exit the market.
Brokers and lenders must keep clients in the loop on realistic timeframes
It is worth keeping an eye on the horizon in general as, when these changes come to fruition, any dip in activity due to the stamp duty deadline or strains on buy-to-let profits is likely to have a knock-on effect.
The pandemic has driven home the limitations of crystal-ball gazing. Although it is always worth protecting ourselves from the future, we should remember the ongoing strength and stability of the bridging sector. While the start of 2022 saw a dip from record highs in the fourth quarter (Q4) of 2021, Association of Short Term Lenders data shows applications, completions and loan books have since rebounded.
Completions were just over £1.4bn in Q3, an increase of 15.9% on Q2. Applications continued to rise, reaching £7.9bn, an increase of 5.4%.
And loan books showed a small rise of 1.5%, now standing at another new high of just over £6.1bn.
The reductions in the tax-free allowance for capital gains tax are drastic
But these transactions rely on various moving parts. Legal timescales are a perennial issue and, while we might have expected things to ease after the chaos of the pandemic, this vital but overstretched part of the process continues to face delays.
Valuations
Similarly, valuations are a lynchpin of any transaction and are currently subject to significant delays between visitation and report delivery. Various factors feed in to this, from a reliance on hard copies and word processing to the extensive due diligence needed to complete even a simple report, and the demands of multiple ongoing cases on valuers’ time and resources.
The pandemic has driven home the limitations of crystal-ball gazing
Brokers and lenders in the bridging sector must keep clients in the loop on realistic timeframes and how to keep things moving.
But the short-term finance sector is in good shape right now, insulated for the most part from the events affecting rates in the mainstream market.
Vic Jannels is chief executive of the ASTL
This article featured in the December 2022/January 2023 edition of MS.
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