Events in Ukraine and the ripple effect to our economy have been immeasurable.

I suspect 2022 was slightly different for Tuscan Capital than for most other bridging lenders.

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In 2022, we deliberately didn’t compete by reducing prices in the first six months of the year. This left us some way behind our budget in a very competitive market, but we underwent a lot of soul-searching and came up with a plan which has worked well, and we have ended the year in front. It’s always nice to win when you were trailing behind at half time!

Interest rates have risen, but let’s not overreact. At the time of writing, the base rate is 3%, which is still significantly lower than the 50-year average. The reaction of the specialist finance market has led to what I think is a much-needed correction in pricing, as I believe competition was overheated. The bridging market reacted with some sensible adaptations to products through variable and fixed options. While we might be in a recession, I don’t see the economic fundamentals resulting in doom and gloom for the specialist lending market.  

The truth is that being in a benign interest rate environment for 10 years means many people forgot what a volatile market looks and feels like. Swap costs can be unrealistically high in a volatile market, so variable products do have a place. Short-term providers lending to borrowers on a fixed basis can and did catch a cold earlier this year where they hadn’t hedged their funding – most didn’t do this as it is prohibitively expensive. Lenders who have remedied this and have certainty in their margin going into 2023 will be best placed to succeed over the next 12 months.

I very much doubt 2023 will be a buoyant year for the property market. I expect the residential market to be slow, with overall transaction volumes to be down on 2022’s total.

In some regions of the UK, especially those where supply is plentiful, we may well see some price deflation. This could be particularly marked in areas where BTL investors make up a significant proportion of the property ownership. I also wouldn’t be surprised to see more smaller landlords reduce their portfolios or exit the BTL market completely.