CEO of short-term lender association recalls the hard times during 50-year career
To say that Vic Jannels (pictured) has seen it all before would be an understatement.
A mortgage veteran with more than 50 years’ experience, Jannels believes the ups and downs of the housing market are par for the course, and had a few sage words of advice to give brokers who might be feeling under the cosh at the moment.
“The best thing that a broker can do in the market is to have a solid, sound relationship with their client. That is always the best way to work because it delivers new business almost by osmosis in a client that you’ve looked after. Make sure you take care of them during the good times and bad - the rewards will come from that,” he said.
He should know. Jannels joined the mortgage industry in 1972 as a ‘development rep’ for a building society, a year before the miners’ strike prompted the then Conservative government to introduce the three-day week amid a climate of high inflation, soaring rates and capped public sector pay rises (sound familiar?).
Borrowing was markedly different in those days, however. To qualify for a mortgage, would-be borrowers needed to have invested with their society for a reasonable period first. There were also no specialist lenders, either, and for a building society to be able to borrow money they needed investors to “walk to the counter” and invest large sums of money. Jannels’ job was to convince them to do that with them.
“We might have availability of £200,000-£300,000 a month - property prices were far less in those days – but those quotas would run out very quickly and you’d have people on long waiting lists,” he recalled.
He remembers the 2008 credit crunch for being a much more difficult time for the mortgage industry (“lenders just vanished off the face of the earth”), although he survived that as well.
Yet, he said he had been “staggered” by last week’s events, when 100s of mortgage products were temporarily withdrawn following the government’s controversial mini budget, which sent the pound tumbling, sparking fears of an additional rate hike.
“The market was looking at a period of instability before last Friday. What has happened since has just exacerbated that,” he told Mortgage Introducer.
“It was going to have a fairly substantial effect on the UK’s wider financial market and, specifically, lenders in both areas of traditional term mortgages and short term.”
But as the CEO of the Association of Short Term Lenders (ASTL), a trade organisation comprising 33 lenders as well as solicitors, accountants, valuers and property recovery agencies, Jannels believes short-term lending is in a distinctly better place.
“For those trading down - maybe purchasing a forever retirement home or a property from a deceased estate where there isn’t a long chain - bridging remains an absolutely solid opportunity, and funds are massively available. Interest rates have not yet shifted, and I don’t believe that they will in the short term at any level to cause concern,” said Jannels, who is also chairman of broker Impact Specialist Finance.
Depending on the loan-to-value and the type of transaction, interest rates for a bridging loan can be as low as 0.48% a month for the standard 60%-65% LTV, compared to the current 2.25% for more conventional loans - a rate that is expected to rise to 5.6% next year.
According to the ASTL’s own data, bridging applications, completions and loan books all rebounded during the second quarter this year, with bridging completions reaching just over £1.2 billion, representing an increase of 17.4% on the previous quarter.
Bridging applications rose considerably (£7.5 billion - up 18.7% compared to Q1), as did the size of loan books, reaching a new high of just under £6.1 billion.
The bridging space is so bullish, Jannels said, that as many as 450 lenders were now in the short-term lending market.
“We’re not giving any names away, but I know of one person who sold his legal practice for a very substantial sum of money and decided that he would enter into non-regulated bridging because it’s fast turnaround money,” he revealed.
Looking forward in a rising rate environment, soaring inflation and a possible recession amid a cost-of-living crisis that might see homeowners simply selling up because their mortgages become unaffordable, Jannels reckoned the housing market was resilient enough to avoid a crash.
He said: “The issue is that funds aren’t a problem - all lenders have got funds. The issue is an assessment of whether in a rising rate environment, nobody yet knows where interest rates are going to level out.
“If incomes don’t follow the upward trend of rates, then lenders will have to pull their horns in somewhat in order to manage a client’s ability to pay against the amount that they want to borrow.
“Will that turn into a market crash? I don’t think so. I think it will be a slowing down and maybe a slight devaluation in property values, but that’s only a relevant factor for somebody who’s selling and it’s a good factor for somebody who’s buying.”