How have lending habits changed through 3 lockdowns and what can we expect for 2021?

Cast your mind back to summer 2020, the shops were open and the property market was experiencing a mini boom. I am sure my auction and investment colleagues will attest to the same agreeing many deals and capitalising on the pent up demand from the previous period of lockdowns and BREXIT uncertainty. The Receivership team certainly experienced this too with multiple sales of residential and commercial buildings, which had suffered delays in the first lockdown. Additionally there was a wealth of finance options available from lenders who had experienced a slowdown over the same period. However, during Q4 our perception is that demand started to wane as the nights closed in, alongside renewed concerns over Coronavirus levels.


Government intervention set the tone for 2020. The Coronavirus Act halted possession proceedings alongside providing SDLT and rates holidays. The FCA published further Mortgage and Coronavirus guidance to provide extra support, which combined with some lender’s concerns over reputational risk, has stayed potential appointments, even on those cases that were on watch lists prior to the pandemic. Eventually the stay on proceedings will end and we anticipate that this will bring forward the backlog of forfeiture and possession proceedings, loading an already strained Court system. Additionally ONS data shows that unemployment has risen to 5%, despite Furlough currently continuing, leaving tenants unable to pay rents and property owners unable to service mortgages.

We all anticipate that defaults are coming. The end of Q4 saw Debenhams announcing closing down sales across all platforms and Q1 has seen the news of the Arcadia Group’s administration. Similarly there have been shopping centre insolvencies across Europe in Q4 and we anticipate seeing a similar trajectory in the UK following multiple tenant defaults. What will happen to the high street once the big tenants are gone? How will Landlords service their mortgage?

It is likely there will be forfeitures across the high street, particularly of fashion retailers. Those tenants once considered strong covenants will now be looked upon less favourably whereas those smaller tenants who have paid rent throughout will see increased desirability. This will affect the Loan to Value across loan books. No doubt, the change in planning law is welcomed across the property sector however is this sufficient to see long-term change in how our town centres operate?

Moving into 2021, it is likely the high street will change significantly in the coming year, the office market will start to undergo a shift as people adapt to new working practises and the residential market absorbs the shockwaves caused by the virus. These challenges bring us on to the considerations going forward to Q1 and Q2:

  • Will the stay on possession proceedings and forfeiture be extended?
  • Will the Government continue to prop up the property market through SDLT and rates holidays?
  • What will FCA guidance be going forward?
  • How will rising unemployment affect both commercial and residential assets?
  • How will investors and lenders assess tenant covenant strengths

Undoubtedly there is lots of uncertainty in the market but one thing is clear the Government support will end leaving lenders with limited options except to appoint Receivers.


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