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By Gareth Davies
Over the past, twelve, turbulent months since the initial shock of the September 2022 mini-budget, the financial landscape has proven to be volatile and unpredictable. The Monetary Policy Committee’s (MPC) decision to continually and rapidly increase base rate, has seen dramatic rises in mortgage rates that are now typically three times higher than they were 18 months ago.
What transpired in the wake of the mini-budget caught virtually everyone off guard, with far-reaching consequences that reverberated throughout the financial sector. It marked a significant shift in economic policy for the Government, from a leader who had taken office just two and half weeks earlier.
Lenders of all sizes, including Hodge, chose to withdraw financial products from the market and adjusted pricing strategies. The decisions stemming from expert predictions that BoE Base Rate could spike to 7% by August 2023, coupled with ominous forecasts of average property prices declining from anywhere between 10% to a staggering 40%. These unsettling developments sent shockwaves through financial markets, causing anxiety among lenders, borrowers, and virtually all stakeholders in the financial services sector. Investors grew hesitant to commit, and developers, having previously been impacted by brutal inflationary rises and supply issues earlier in 2022, remained cautious about initiating new projects.
However, amid the aftermath of the mini-budget and the continual challenges resulting from Russia’s invasion of Ukraine, the future is starting to look a little more stable. The catastrophic predictions remained just that—predictions. And, while some challenges persist, we’re seeing inflation reduce significantly (6.7% at the time of writing, down from Oct 22 peak of 11.1% - ONS) as well as the MPC’s decision to keep rates at 5.25% on 21 September 2023. Apparently, “the medicine is working”. . .
With clients back from a well-deserved summer break, interest in our product offering continues, demonstrating there’s still appetite out there from experienced investors and developers as we continue to support the real estate market across mainland UK.
We’ve seen a change in the level of interest for some products, reflecting the evolving needs of investors and developers.
As market conditions have become more challenging and the cost of finance increasing, we’ve seen a rise in enquiries for mixed use assets as investors widen their focus. We can blend the commercial and residential finance elements together or treat separately to structure the right deals that work for all parties depending on the specific circumstances.
We also continue to see interest in our core development finance product. A positive sign for the market showing developers are starting to rebuild confidence and moving to create much needed new homes in the UK. Hodge is pleased to play our part in supporting this.
With the most challenging year I’ve seen in real estate since the global financial crisis now behind us, we’re excited to work with and support many more experienced developers and investors across the UK with their property development and investment goals.
We’ve built families of products so we can serve clients at every stage of the transaction cycle which has resonated well with the broker and client communities.
The financial landscape is evolving. Where we may see challenges in one area, we also see opportunity in others, like investors recognising the potential of mixed-use ventures or developers choosing to retain their assets rather than selling them, to benefit from rental income, working with Hodge to term out their development finance facilities.
At Hodge, we’re strategically positioned to lend our expertise to navigate the challenges that emerge in various sectors. Our Commercial Lending team is made up of experts across residential, commercial, and mixed-use finance, enabling us to offer valuable support and tailored solutions to our clients.
We’re committed to serving you as a trusted partner, offering innovative financial solutions that empower our clients to navigate this ever-changing terrain with confidence.
To find out more about how Hodge can help with property development and investment funding please get in touch with our experienced commercial lending team or email us at [email protected] or [email protected]
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