Sentiment Down Amongst Bridging Lenders in Aftermath of Brexit Vote

In a poll taken in the week immediately following the EU referendum, confidence amongst bridging lenders dropped noticeably, although in the quarterly members’ meeting held last Thursday (7^th July), the mood had definitely swung back up again.

Benson Hersch

One of the biggest changes was what lenders felt about the UK economy.  24% felt more positive about the long term future of the UK economy since the Brexit vote; the downside was that 60% felt less positive.  This compares to 38% feeling positive about the long term future of the UK economy directly after the budget back in April, when only 19% felt less positive.

When looking at shorter term economic prospects, there was also a downturn; with 66% saying they were not confident about the prospects of the UK economy over the next 12 months, double the 33% who had not been confident following the budget in early April.

Interestingly there are already signs that these responses were an impulsive reaction immediately following the vote and that this view has already been tempered in the week since the survey was undertaken.  With forty or so people around the table, of both lender members and associates, including valuers, auditors and lawyers, mostseemed relatively sanguine about our new reality.

The majority reported that they had not yet seen any noticeable change in business,with some lenders either doing their largest ever loans while several smaller lenders reported a considerable uplift in business.

This was reflected in the sentiment survey where 75% of lenders felt that, regardless of the outlook for the economy as a whole, the volume of business at their firm would either increase or stay the same over the next six months.  That is not to overlookthe one quarter of lenders who thought that their business volumes would decrease, up from only 5% two months’ ago.

Lenders were less positive about the growth of the bridging market as a whole: In April 71% thought the total bridging market would grow over the following 12 months, this reduced to 20% in the post referendum survey.  However, feedback from the meeting of both members and associates was that even now new lenders are continuing to enter the market and that the turmoil in the stock market was only adding to that.

Benson Hersch, CEO of the ASTL says, “It is clear that there was a general sense of shock immediately following the referendum which led to some dramatic results in the sentiment survey but this negativity has now been tempered in many quarters.  In speaking to lender members, several have expressed that while the UK economy is undoubtedly in for a rocky ride over the next few months or even longer, much of what we are seeing is a correction that would have happened anyway. Several feel that both the pound and property were overvalued and a correction was due, but that this correction was brought forward by Brexit.

“Brexit is also a good excuse for both politicians and some businesses to release bad news that actually pre-dates Brexit by some time and many situations are now going to be blamed on it.  The sentiment survey was a snapshot in time immediately following the referendum, but I expect to see these results swing back up towards the positive as the markets settle down and people get used to the result.”

The next survey will be conducted in six weeks’ time, to see how lenders feel once they have had time to reflect on the state of the economy in a post Brexit referendum world.

To find out more about the ASTL please visit: www.theastl.org