What will Brexit do to property developers and traders? Well I don’t know for certain and neither does anyone else. However, I can offer some predictions. If we assume that the Bank of England will keep interest rates at 0.75% then I believe that mainstream lenders like banks have already factored no deal or bad deal Brexit scenarios into their credit criteria. Loan applications which lead with good cash flows will dominate over valuation led proposals. Mainstream lenders will not be so interested in low LTVs, they will want strong revenue streams.
Mainstream lending policies forged by Brexit will leave the door wide open for alternative lenders. The size of the bridging loan sector at £5 billion per year is impressive enough but Brexit has the potential to increase this significantly. Alternative lenders will initially suffer from valuation firms marking down property values for fear of getting sued post Brexit, but I believe that this is a good thing as the cash required to buy or develop a property will reduce as a result.
Though any reduction in mainstream lending may inhibit refinancing I believe that we will see new buyers entering the market seeking a bargain hence more repayments will come via property sales.
Alternative lenders supported by private resources could see their lending capacity becoming more in demand causing interest rates to climb, though I cannot see the days of 2% per month returning anytime soon. Well run and well-funded alternative lenders have the opportunity to build their loan books on the back of Brexit uncertainty. It will be interesting to see who takes the initiative.
NOTE: The opinions in this article are my own and must not be regarded as financial advice. If you are considering investing in property you are strongly advised to first seek professional financial advice.