Truss budget fallout will drag on growth, LendInvest warns
Property fintech LendInvest has warned that the fallout of Liz Truss’s disastrous mini-budget in September will drag on growth in the second half of the year, as borrowing slows amid sharp interest rate hikes.
The London-listed firm, which provides mortgages and bridging loans for property, said that volatility in the market would temper growth in its assets under management while interest rate hikes would squeeze its margins in the second half of the year.
“We have our lowered Platform [assets under management] growth forecast as a result of the government’s mini budget announced on 23 September and the subsequent increases, and volatility in interest rates,” the firm said this morning in its interim results.
“We expect some margin compression from higher input interest rate costs in H1 FY23 as lending rates were slower to follow, although we expect margins to normalise towards the end of H2 FY23.”
Truss’s mini-budget sent mortgage rates soaring as lenders priced in sharp rate hikes to tame a predicted inflationary surge. Hundreds of products were pulled from the market in the wake of the budget.
Rates have since begun to settle, however. Governor of the Bank of England Andrew Bailey yesterday told a select committee that there are “signs that the price of a new fixed-rate mortgage is coming down” as the “risk premium comes out of that pricing”.
LendInvest’s warnings today came as it reported a 33 per cent rise in managed assets in the first half of the year to £2.4bn, driven by a 44 per cent jump in buy-to-let mortgages.
Pre-tax profits rose by 45 per cent to £14.8m, with £3.6m of the increase down to interest rate hedges made on its buy-to-let portfolio, the firm said.
Chief Rod Lockhart said that the firm’s performance in the first half of the year had been “robust” and said there was “considerable scope” for further growth in existing markets.
“We are well-positioned to weather the current difficult macroeconomic backdrop, given our robust business model, diverse sources of capital and ability to respond with new products in a fast-changing environment,” Lockhart said.
“Underpinning our business, we have strong cash reserves with rigorous credit discipline. In addition, we have more than £1bn in lending headroom to support our borrowers when market conditions improve,” he added.
LendInvest chief Rod Lockhart talks to City PM in October on emissions in the property sector and the impact of rate volatility on the market.