Innovative market solutions supporting client demand
From banks to businesses to commercial property investors, everyone is looking to find ways to drive momentum and growth in a challenging market. Lenders are thinking outside the box and reducing margins wherever possible to ensure cash flow remains within criteria for property investment transactions as well as other innovative areas. What impact will this have for clients, and in turn our partners, brokers and IFAs and how does it help the economy and UK business growth?
Mortgage lending rates
Whilst UK mortgage lending is forecast to grow just 0.4% net in 2023, there is slightly higher forecasted growth of 1.4% net for 2024. The market is arguably subdued as it continues to recover from the economic blows of recent years. Steps that lenders are taking such as cutting their margins however are sure to have a positive impact.
Inflation and interest rates
There is no doubt that the cost of living is still having a significant impact in the mortgage markets, but inflation looks set to fall back throughout 2023 and whilst there may be some further increases, or indeed the reduction curve pushed back based on recent market data, the Bank of England is predicted to cut interest rates as we head into 2024. This will improve and boost the housing market and have a knock-on effect throughout the property development sector.
Forbes recently published some analysis on some of the bigger players who are offering attractive rates to keep the market moving. There is some real potential for our partners, brokers and IFAs to capitalise on deals to offer their portfolio clients. Not just across the residential investment space, but commercial clients can also benefit from changes in lending parameters, new products being offered and continuing changes to criteria trying to adapt to the challenges we all face.
Some of the innovative changes include:
Green Incentive through discounted rate – many lenders are offering discounted rates for properties which meet EPC ratings A-C, this not just means reduced interest costs but potential to borrow more based on stressed affordability calculations.
There are also many new products available to support the refurbishment of properties to improve EPC ratings ahead of the required deadline, clients able to borrow 80% net with all interest and fees added in some cases.
Reduced debt service requirements: Following continued rate pressures being applied across the market, one commercial lender has taken steps to reduce their internal affordability calculations to allow their clients to borrow more and make deals which didn’t previously meet criteria now affordable, whilst maintaining safe lending standards. Available across commercial owner occupied, commercial investment and semi-commercial property.
Many BTL lenders are reducing interest rates across their product ranges to allow deals to meet requirements on a cash flow basis. Through increasing the applied fee they can absorb the reduction in internal capital return lost in reducing the rate offered, allowing clients to borrow more. Through doing so, many refinance deals which previously didn’t meet serviceability or were requiring clients in inject capital, now offer multiple full refinance options or capital raising potential where requested.
These other deals will no doubt reverberate across commercial solutions and are a clear indication lenders are being innovative and looking to ensure the market remains moving.
At Omega we have strong well-established relationships with multiple lenders that enable us to provide our partners, brokers and IFAs with competitive rates and professional service for their clients. Speak to our knowledgeable team today.