Game of Loans: Butterfly effect

Butterfly effect



I had an interesting discussion with a counterpart from another lender recently about how some of the small facets of change in the world seem to have large effects on the wider market and our industry.

This rings particularly true for the bridging and commercial space, which if you compare to where we are now to this time in 2015, 2014 and so on, the pace of change on an annual basis is rapid. Introductions of new products, loan to values, regulations, practices and approaches all have huge implications for our sector, as well as external factors that dictate how lenders need to work.

Take rates for an example; we saw a period of a lot of lenders entering the bridging market very quickly, followed by a rate war and then more recently lenders dropping out, or no longer willing to compete in what is already a very saturated market.

But what’s caused this?

Brexit seems to be the number one excuse causing liquidity problems for some lenders. It has no doubt created a lot of uncertainty which is unlikely to dissipate any time soon. However I don’t really believe that this is the sole cause of this recent slowdown, but what it has done is brought a lot of underlying issues in the property market to surface. Just before the referendum vote, changes to stamp duty triggered inherent change in the market. We are also staring down the barrel of a very alarming election result in the US in November, which could have huge implications for the global economy. Likewise, I suspect that inherent problems in the Eurozone with economies such as Greece and Italy will begin to rear their ugly heads again sometime next year.

Without focussing too much on the doom and gloom, it’s interesting how relatively minor changes in the economy and markets can have huge implications for our industry, as various lenders have started to find out. Conversely, I think this is going to create opportunity for some lenders and broker firms as the face of our industry continues to change quickly. New areas of lending may emerge where there hadn’t been as much activity before and there’s always room for improving what we are currently doing. I had a bet with a colleague before the referendum that a Brexit vote could in fact prove hugely positive for principal lenders, and it turns out I was right. It’s now more important than ever to have certainty of funds.

Take Regentsmead for example. You may have heard that something big is coming in September, which we are all very excited about. Building on a strong few months here we have spotted areas of the market that we are looking forward to growing in and this was all brought about by several fundamental changes in the world around us. I suspect the rate of change isn’t going to slow down, so all the more reason to keep our fingers on the pulse and react quickly to further deviations.


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