Writing a roundup at the end of 2021, I didn’t expect to be making similar claims 12 months later of another unbelievable year. And yet here we are.
And I’m not just talking about the market. We’ve seen the death of Her Majesty the Queen, marking the end of the Elizabethan era after 70 years; in government, at one point, three Prime Ministers within seven weeks; a now infamous mini-budget which upended the economy, and internationally, an ongoing ‘European war’ in Ukraine.
And in the market, we’ve seen skyrocketing interest rates, mortgage deals pulled at scale, an energy crisis, and record inflation levels fuelling the most significant cost-of-living challenge we’ve seen in recent years.
Record lending
In some ways, we’ve been extremely fortunate in the commercial market – as the turmoil hasn’t been experienced in quite the same way as in the residential sector. And, as a business, we’ve had a record lending year, hitting and indeed significantly exceeding, the target we set ourselves in January, reaching in excess of £500 million new mortgage completions in 2022, supported by a year-on-year increase in application volumes of 150%.
We’re so proud to have been able to support our client base as much as we have. In fact, many of the changes we’ve made in 2022 have been driven by a desire to support more borrowers than ever before, like changing the criteria on our buy-to-let, holiday lets and HMO products so that landlords can take them out in their own name; lifting geographical restrictions on our HMO product; and removing minimum thresholds on the amount an individual landlord can borrow where they have a certain number of properties. We’ve also re-entered some commercial sectors, like providing 75% LTV lending on offices, following the end of Covid restrictions across the UK.
There have also been other significant milestones, like our Midlands and South-West regional teams completing their highest-value deals to date; and launching our broker portal in March, a significant step change which is making the application process quicker and slicker for brokers and their clients, and really harnessing technology to deliver better broker and customer outcomes. We’ve also really focussed on strengthening our regional teams, so that relationship directors are available wherever our brokers need us, no matter where they are.
The future
However, as we face 2023, we recognise that there is still much work to do, both for us and for the commercial market.
For the market, the continued impact of the cost-of-living crisis means squeezed budgets for consumers are likely to continue well into next year. This will create a knock-on effect on the commercial market, as less disposable income means people have less to spend on leisure and retail, potentially pointing to fewer lending requirements for these types of premises.
As for commercial investment, it’s true that there has been an increase, post-pandemic, in people returning to the office. This increasing demand has resulted in requests for high quality office space, in particular, so quality over quantity matters.
In the industrial space, demand is also strong. Industrial rental prices increased by 9% in the first six months of 2022, which could mean growth opportunities for commercial lenders and brokers catering for such requirements into 2023.
Demand has also been extremely high in the buy-to-let sector this year, which is set to continue and has fuelled an increase in rental prices (there was an increase of 3.8% in the 12 months to October 2022).
What’s more, first-time buyers are struggling to get onto the property ladder – even more so now with potentially much higher monthly mortgage outgoings to consider – which is likely to fuel the demand for buy-to-let even further.
However, there’s no doubt that landlords are also facing challenges, with affordability issues at the top of this list in the higher interest-rate environment, as well as energy performance certificate (EPC) deadlines to meet and recent changes in capital gains tax. So, landlords of every kind are likely to need support from brokers into 2023, in order to continue providing their vital services to the market.
As for us, we’ve an ambitious growth plan for 2023 which is already in progress. It will involve significant team expansion creating 40 new roles, an evolution of strategy, and a continued focus on our exceptional service and the strength of our teams, with our consistency as a strong, stable lender at its heart. We just can’t wait to deliver it.
So, until 2023 beckons, I’d like to wish you a Merry Christmas and a Happy New Year.
Tom Simpson is managing director of YBS Commercial Mortgages
