It’s said that the secret to comedy is… timing, and indeed there’s a lot to be said about it perhaps being the secret to success as well. I’ve been reminded of this recently in weighing up how the vote to leave the EU is currently playing out, in particular what it means for the housing and mortgage markets.
On a recent ‘Brexit impact’ debate on L&G Mortgage Club TV – and I appreciate we currently appear to be nowhere near ‘Brexit’ yet – I, and some industry colleagues, discussed how the market has been shaped (or otherwise) by the vote to leave. I couldn’t help but think that in terms of timing, and what it means for certain UK mortgage lenders, the vote (and its subsequent result) came at the right time, although I think many in the mortgage market would have liked the result to be Remain rather than Leave.
The question was asked, how was Brexit affecting UK mortgage lending? It is of course early days but there appears to be an inkling that, certainly for those lenders who seek their funding via the capital markets, the timing of the vote has not halted their ambitions. Indeed, given the traditional lull in the capital markets during the summer months, thinking time appears to have been provided to all concerned just when it was most needed.
Back in the immediate aftermath of the referendum, there was undoubtedly a sense not perhaps of all-out panic but certainly one of fear and trepidation at how events might truly play out, and how the capital markets might react. However, with July and August forthcoming, what has benefited (I suspect) the entire sector is something of a period of grace; a couple of months to experience the short-term outcomes and to plan and prepare for what might be coming over the horizon.
With September upon us, I sense a far more relaxed attitude, certainly amongst the fund and investment profession, albeit one tempered by the knowledge that Brexit has not yet meant Brexit. That said, in terms of the capital markets and the potential for UK lenders via securitisation, the environment seems rather more benign than it did at the tail-end of June, and for that reason I suspect the capital markets will open up as normal in September and deals will be gotten away.
Overall, one can clearly see that the vote for Brexit is not the same as the invoking of Article 50, and we may find ourselves in a completely different area when we fully begin on that path. However, what brokers (and their clients) should see now – and the cut to Bank Base Rate will certainly have helped in this regard – is a greater degree of confidence in the market, from all stakeholders, especially when compared to two months ago.
For us, as you might expect, we took the decision to look at our lending activities immediately post-referendum. This was certainly a time for caution so we took the decision to withdraw some of our higher LTV products and to be more cautious – there’s that word again – in terms of our criteria. There were some deals that we probably would have okayed pre-referendum but decided not to in that particular period.
However, as time has moved again, and we’ve seem a greater degree of stability, aided by the Bank of England’s actions, and we’ve also developed a more clear idea of how the market is reacting, we’ve begun to make both criteria and product changes. In a couple of weeks we will relaunch our product range and I’m able to say that, for the most part, we’ll be back to where we were pre-referendum – a situation I think which will be welcomed by both our adviser partners and their clients.
There are of course a number of challenges to come – ones that are bound to have a clear impact on the buy-to-let market, not least Brexit, the income tax changes, plus the changes to buy-to-let underwriting. These will shift the sector again but underlying this is still a strong demand, coupled with a lending sector with a strong appetite to lend. For those clients currently able to finance/refinance the timing right now is perhaps as advantageous as it’s going to get, and one would advise them to act now rather than wait.
Bob Young is chief executive officer of Fleet Mortgages