As the Global ABS conference ended there was no doubt that it was a huge success, with official numbers being confirmed at 5,500 attendees, making it one of the best attended ever.
The fact that that so many people from all over the world can take the best part of a week out of their diaries to attend this is a good reflection of the importance of wholesale funding in today’s market.
There is no doubt that rising inflation and interest rates are concerns in the market and this is causing liquidity issues as many established funders and banks look to reduce exposure.
Thursday’s increase of European Central Bank interest rate by 25 basis points was generally expected by many attendees as inflation on the continent continues to rise, and this will only add to this pressure. The general consensus appears to be UK rates will hold at 3.75%.
VOLUME STRAIN
Speaking with many funders, they seem to be becoming more consolidatory. Some existing funding lines are not being renewed and for non-bank lenders, this is only going to cause more strain on volumes and also add more cost as they must negotiate new lines with new funders.
The Private Credit market has seen considerable growth over the last decade or so mainly due to accepting higher risk and funding deals than more traditional funders are willing to take on due to being more regulated.
However, as with the mainstream funders, the availability of Private Credit is reducing due to economic pressures, and with concerns following the collapse of Market Financial Solutions.
In this evolving credit environment, an obvious area to keep a close eye on will be credit policy and criteria.
Lenders will remain under pressure to achieve volume, and if funding becomes tighter, a way to maintain market share could be to take on more risk, which in turn, could leave to different issues in book performance in later months and years.
NOT ALL DOOM AND GLOOM
The conference was not by any means all doom and gloom, but a realistic line in the sand of where our industry is at today.
The buy-to-let market is going through a re-mortgage merry-go-round, with overall balances overall pretty stagnant but with low arrears levels, reasonable margins to be had and a lack of housing stock, still being an attractive overall proposition to enter with the right proposition.
Second charge lending offers good margins and funding is available. A track record of success and experience in the sector are definite criteria for obtaining funding, and so new entrants must have the right team in place to have gravitas to do so.
BRIDGING GROWTH
Bridging finance is a fast-growing sector and funding is available to support growth. I met quite a few players in this space who are looking to grow, but all want to do this in a controlled way to ensure quality is achieved as well as volume.
So, was the conference a success for Phoebus?
As a servicing product provider with c£120 billion of mainly specialist assets being serviced by our clients, we were able to catch up with many clients and prospects in one location which is great.
In addition, meeting with other parties to transactions such as lawyers, rating agencies and other third parties is hugely valuable to gain market intelligence and new ideas, as well as get our messaging across to the wider market to solidify our position as market leaders.
Next year’s conference dates have been confirmed as 15-17 June and we will 100% start to plan our attendance.
