Broker Trends and Opportunities – May 2024

May starts with a sense of déjà vu over the uncertainty of the timing and frequency of interest rate cuts – though there is a consensus that rates will be cut at some stage…maybe soon?

Financial markets (which drive the cost of mortgages and commercial finance) hate uncertainty, and we can\’t count on May to bring opportunities based on a reduction in the cost of funding. 

How can brokers in a period of extended uncertainty add value to their clients and keep the wheels turning in their business beyond the \’must-do\’ of refinance and product transfers?

We cannot forget that alongside rising interest rates, we\’ve also been through a recent period of rising residential property prices – to a point where a combination of the two could cause landlords and property investors to look in new directions for a solution to affordability, or opportunities:

Opportunities for landlords and property investors

We cannot forget that alongside rising interest rates, we\’ve also been through a recent period of rising residential property prices – to a point where a combination of the two could cause landlords and property investors to look in new directions for a solution to affordability, or opportunities:

• Diversifying income from standard ASTs on single-unit residential properties to HMOs is increasingly seen as a way to increase yield and reduce vacant periods
• Semi-commercials add the element of longer-term commercial lease to residential tenancies – and \’mixed-use\’ opportunities don\’t stop there when you can additionally adapt the residential element/s to HMO use over single-unit flats, for example
• Portfolio landlords have recognised the benefit of short-term lets and holiday lets into a broader property holding – again diversifying income and altering the stress-testing profile of their overall portfolio
• There\’s attraction in immediately adding capital value to a property over purchasing something someone else has already refurbished and is making a profit on – we see strong demand for auction purchases with bridging finance, followed by a period of refurbishment work before exiting the short-term funding into a Buy-to-let mortgage.
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Trading Businesses

Brokers with owners and directors of trading businesses have the perfect opportunity to help their clients in periods of sustained inaction and uncertainty in the cost of borrowing:

• The cost of business opportunities is a major cause of sleepless nights for business owners – all of the costs of taking on a new business opportunity are immediate and up front, with all of the revenue from goods or services coming in at a later stage.

Additionally, is there an opportunity cost in not quoting for, or taking up, new business opportunities – will the client return if, on this occasion, a competitor fulfils the work?

• Many businesses took on shorter-term debt in the last four years – some multiple times – and the cash flow constraints of servicing multiple short-term loans can stifle productivity and growth opportunities – debt consolidation is potentially a significant help to any of your clients in this position. 
• There\’s a clear return on investment calculation for adding assets to a business—production vs. cost or in-house vs. outsourcing, for example.

There\’s also a significant tax incentive for businesses to invest in new assets and vehicles—100% of qualifying spending is eligible for \’Full Expensing\’ tax relief against corporation tax bills.

Where do we see the opportunities in May? They lie with proactive brokers who look for solutions that could add value to their existing clients instead of waiting for market conditions to be right for the services they traditionally work with.

Mark Grant, Managing Director – UK, Fiducia Commercial Network

May 2024.

About Fiducia Commercial Network

Fiducia Commercial Network is a commercial finance \’Appointed Representative\’ network created to allow independent firms to provide commercial property finance and trading business finance options to their existing client base and network.

Joining the network provides opportunities for professional brokers to offer a full range of commercial finance solutions by acting as an Appointed Representative (AR) with the full support of the Fiducia Commercial Network team.

The Fiducia Commercial Network membership includes FCA authorisation and reporting, PI insurance, and NACFB membership, plus business, compliance, finance, system, and admin support from a company with over 20 years\’ experience in commercial finance.

If you\’d like to discuss joining Fiducia Commercial Network or you\’d like to apply to become an Appointed Representative…

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