The New Normal?
The rate game, where do we go from here?
Our immediate take on the way ahead for motor finance in the specialist automotive sector and the view from the inside. The lending appetite is still strong but where does it go from here and is this level of interest rate the new norm?
Last week, as you know, the Bank of England raised interest rates to 4.5%, the 12th successive increase, creating the highest interest rate since October 2008. The speed at which the BoE have increased rates has led to many of you asking for our opinion on the situation and what this means for the specialist car market. Will the asset finance houses follow at speed? The rationale for the continued increase is made perfectly clear by our friends at the bank – “Inflation is too high. It’s been around 10% since last summer…well above our 2% target”.
Due to the increased popularity of fixed mortgages in recent years the Resolution Foundation estimates that “Only a third of the mortgage pain” has so far been felt. Furthermore “In aggregate – annual mortgage bills have increased by £4.2 billion since the Bank started raising rates, with around £8 billion more to come in the next few years and over £5 billion of that being felt in the next year”. Serious numbers!
Therefore, this would suggest that the BoE are not going to stop here, against my own early predictions, a further rate rise could be on the agenda. The financial markets agree, and UK Gilt Yields suggest that rates will continue to increase for the next 6-12 months (UK 6-month Gilt Yield: 4.7%) before decreasing during the next 2 (3.8%) to 5 (3.6%) years.
Given the environment of high inflation we remain slightly bullish on the wider specialist car market as buyers look for hedges against inflation and despite the rate rises, we are still notably busy. Not only on assisting with asset purchases, but also with our speciality of equity release and loan consolidation. It appears there is still a strong desire to use valuable cars to leaver capital than drawdown on other lending and banking facilities.
For those of you deliberating or unsure what to do – we’re recommending locking in the rates available now rather than roll the dice on whether there will be future rises. When finally the time comes that interest begin to cool, which they may, we can then explore refinancing the selected arrangements at a more favourable current market rate.
For a review of your current position – call us to talk it through.
What we do best, debt restructure and consolidation – a case study…
Who?
– A high net worth property developer with a mix of offshore and UK income streams.
– A portfolio of 18 significant and interesting Porsche cars with a market value of circa £1.8 Million
– A need to restructure multiple agreements onto one document , raise an element of working capital and reduce his current monthly liability.
How?
– A market revaluation of his portfolio of special Porsche cars to establish a suitable loan to value.
– Underwrite the proposal ensuring continued serviceability of the facility and asset security.
– Raise a Regulated Sale and Hire Purchase Back document with the flexibility to make partial or full repayment without penalties.
– Disperse any existing loan debt with existing lenders and release remaining equity for required use.
Why?
– Our client had an immediate and urgent need to raise capital and restructure current loans.
– Disposing of any of the cars by stress selling may have resulted in under achieving their true market value and losing his well selected models.
– Using cars to lever against is an efficient, fast and effective way to raise capital.
Using our carefully selected panel of specialist lenders and valuation partners, Hagerty, we are experienced in making these restructuring and equity release exercises simple and efficient. Our skillset and lender support ensure a fast and seamless turnaround with clear and realistic terms.
Loan restructure and consolidation can be applied to a multiple variety of assets and not just restricted to motorcars. All proposals are obviously subject to status and underwriting but a brief conversation will establish if and how we can help. Our products are market competitive and fully regulated.
