It’s always interesting to compare transactional volumes that we are seeing as a business with the statistics and data which are constantly emerging from the wider mortgage market. For much of 2023, volumes across a variety of specialist sectors have been fairly robust, although there have been some inevitable ups and downs given the economic climate, inflationary pressures, interest rate rises and affordability concerns.

Q3 2023 was certainly a noteworthy period for the market, especially when compared with the same period the previous year which included a mini-budget that I’m sure we’d all like to forget.

So how have the specialist markets performed in Q3 and how have they matched up to our experience?

Bridging finance

Starting with some positive news from the bridging finance sector, Q3 data collated by the Association of Short Term Lenders (ASTL) showed increases across all areas of lending, with bridging loan books continuing their upward trend, growing by 2.0% to reach a new high of £7.3 billion. Applications were said to have risen to £9.7bn, an increase of 5.6% compared to the previous quarter. Completions hit £1.4 billion, an increase of 5.8% on the previous quarter and average LTVs were virtually unchanged at 57.7%, which represented a tiny decrease from 57.8% as outlined in the previous quarter.

Additional data from the Q3 Bridging Trends report also suggested a bounce over the quarter, with bridging loan transactions rebounding from a slower second quarter to total £191 million, representing a marked increase from £165.7 million in Q2.

This is an area of the market which has generated a wealth of enquires and opportunities for our introducers over the course of the year and shows no sign of slowing down anytime soon. Especially when it comes to supporting an array of residential chain breaks and on providing property professionals with funds to embark on refurbishment projects, energy efficiency upgrades and on a growing number of auction purchases.

Second charge

Figures from the Finance & Leasing Association (FLA) showed there were 7,833 second charge agreements in Q3 totalling £354m, down 17% by volume and 20% by value compared to the same quarter in 2022, while the year to September saw new deals fall by seven per cent.

The value of new business in September (£109m) represented a fall of 22% by volume and 25% by value compared to the previous year. These may seem like substantial drops but, as outlined in the commentary around these figures, this followed a ‘particularly strong performance’ in the same period of 2022 and was also a reflection of the ‘weaker economic outlook’.

From our perspective, second charge business is still out there and it’s prudent to point out that a number of second charge lenders remain well placed to support a range of borrowing needs. Debt consolidation and home improvements are still generating the highest demand but it’s important to note that, in recent times, debt consolidation has been more geared towards creating disposable income and monthly money management in light of the recent cost of living crisis.

Buy-to-let

In the spirit of maintaining positivity levels, the latest BVA BDRC Landlord Panel research, undertaken on behalf of Foundation Home Loans, found that landlord confidence across a number of different metrics has improved over the course of Q3, with many anticipating continued increases in rental yield, a stronger performance from their own letting businesses, capital gains across the portfolio, and a better private rental sector (PRS) as a whole.

The research also showed that the landlord community had responded positively to the Government’s September announcement not to take forward plans to introduce mandatory EPC levels at C and above for all PRS properties. 12% of landlords said the Government announcement meant they would be ‘able to stay in the UK rental market’.

It’s highly encouraging to see rising landlord confidence and we’ve certainly seen some steady growth in activity levels from the more professional end of the landlord spectrum emerge as they adjust to the rapidly changing property landscape and in maximising the opportunities to add to their portfolios or divest into more alternative but higher yield property types. And long may these upbeat and progressive trends continue across the whole specialist lending market.

Donna Wells, Managing Director at Envelop