Adapting to change and thriving in uncertainty
Posted on Jul 03, 2017 | in Blog
There’s a lot of uncertainty out there at the moment. Politically, we’ve got a leader who is arguably in office but not power, and an opposition leader who would surely introduce all kinds of problems for UK plc.
There’s also the small matter of Brexit — hard, soft or or medium-rare — and a Government without a mandate trying to negotiate it.
Economically, there’s a huge amount of uncertainty, too. Again, the impact of Brexit is the biggy, but there are a lot of mixed messages emerging from the Monetary Policy Committee on the direction of interest rates, an issue that is becoming ever more pressing given the sharp growth in inflation.
The Bank may not want to act, but if inflation continues on its current trajectory, eroding people’s disposable incomes, it could be forced to act.
And closer to home, the housing market as a whole is slowing up. Prices, most agree, are only being propped up by ridiculously low supply and the lack of properties available for sale.
And while I don’t agree with claims by an academic over the weekend that there will be a significant correction in house prices, it’s hard to deny the market is in a soft patch.
The Bank of England, as revealed in its latest Financial Stability Report, is also worried about the rise in consumer credit. With interest rates on loans and credit facilities so low, households have been borrowing like it’s going out of fashion.
Sadly, the one thing that doesn’t go out of fashion is people being required to pay the loans they take out back. And that, Carney and the MPC crew at the Bank reckon, could be a growing problem, all the more so if rates rise.
Alongside the potential for rate rises, many lenders are also having to operate under strict new stress-testing and affordability rules. And with potentially more stringent criteria to come, there’s even more uncertainty facing borrowers and brokers. Risk has rarely been under such intense scrutiny.
In short, it’s a testing and increasingly tumultuous environment. But I’m not worried. When I launched my first specialist lender, Dragonfly Property Finance, back in 2009, things were far worse than they are at present.
Far worse. After all, for a period of time the whole global financial system was under threat. But against this bleakest of backdrops, the UK’s property finance market adapted and evolved.
New lenders emerged that would not just box tick but look at applications on merit, and actually seek to understand them. While many traditional lenders headed for the hills, others saw an opportunity and got stuck in.
As concerns about risk rise today, the number of lenders that can actually understand it, and are able to operate in a less predictable and stable environment, will also rise.
That’s because if we learnt one thing from the Global Financial Crisis, it’s that lending and business models will evolve. Our own risk-based approach to lending is hopefully an example of that.
So however grim the outlook, however high the level of political and economic uncertainty, there will still be a market. For many in the property industry, lenders and borrowers alike, the end is really just another beginning.
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