Since 2023 dawned, inflation appears to be cooling with power prices, in particular, expected to become competitive again later this year.
While three Prime Ministers might have been resident in No 10 since Russia’s invasion of Ukraine, there now seems to be stability.
This was reflected in the performance of the FTSE 100, Britain’s blue-chip index, which recorded one of its best performances in February.
At first glance, all of the above clearly has positive implications for both this country’s economy and the wider success of our sector.
But the million dollar question at this point in time is whether all is as it seems – and whether it will last.
The short answer to this is that none of us know for certain and it’s essential for lenders to remain extra vigilant.
To discuss why, let’s briefly appraise the UK’s property market…
The myriad forecasts about the future of the UK house prices range from the mildly negative to the positively apocalyptic.
In recent months, a range of property experts – including banks and estate agents – have all predicted that rising interest rates and the cost of living crisis will result in property prices ultimately falling by up to 10% this year.
The question remains whether there will be scope for further nasty surprises.
Separately, lenders clearly need to be mindful that the buy-to-let model is evolving at an alarming rate.
Landlords’ mortgage costs are surging higher than their rental income which means that many of their investments could increasingly become loss-making once their fixed rate deals expire.
Independent research company Capital Economics has revealed that the consecutive base rate increases by the Bank of England has resulted in the average interest-only mortgage bill in the first quarter of 2023 costing 220% more than the end of 2021.
With the majority of landlords on interest-only mortgages, could we now be about to witness an ever-increasing number of these buy-to-let landlords selling their portfolios?
The potential repercussions of this are clear.
If the past few years have taught us anything it’s that economic and political headwinds can change rapidly and the FTSE 100 reaching a record high should not be construed as a barometer of our economy’s success.
The unprecedented circumstances that have led to this point mean that there isn’t any guarantee that there will now be an immediate economic recovery in the short term.
It remains entirely possible that lenders could be blindsided when they least expect it.
During these uncharted economic times, lenders owe it to themselves to ensure that they’re in the optimum position to ensure their success and longevity.
They need to relend at rates that are most advantageous to them using their own funds.
Consequently, it’s essential for lenders to identify and subsequently act upon default loans at the earliest opportunity.
And it’s equally essential that they consistently work with the most professional and proactive property receivers to ensure the best outcome.
Edward Gee and Daniel Richardson are property receivers and insolvency practitioners at CG&Co.
