Lending for Land Boosted by Low COVID Rates - Continued strength of land market and plenty of lending activity in the wake of Lockdown 1.
As was to be expected, the backlog of activity as a result of lockdown in the spring has led to a build-up of transactions that has kept lending activity high throughout the year, despite the pandemic. H&H Land & Estates reports that borrowing is being led by land purchase and re-financing requests, pointing to the trending growth in the agricultural land market since COVID-19. With interest rates at a historic low, there is plenty of borrowing activity, and no shortage of opportunity to secure loans from lenders who are still keen to lend.
Tim Parsons, Director of Professional Compliance at H&H Land & Estates, spoke about the current trends: “With the land market pushed back later into the year because of the spring lockdown, the finance markets have had more activity later in the season than normal. We have had one of our busiest years for loan enquiries and applications in terms of size of loans and numbers. With little prospect of interest rises anytime soon, it looks like low borrowing rates will continue to drive activity and opportunity.
“Through AMC we are seeing a greater number of long-term loans circa 30 years, and more demand for interest only and long-term fixed rate borrowing. For larger loans, a fixed rate at around 3.5% looks very attractive, and going forward will help to give certainty in what undoubtedly will be uncertain times. This ties in with other varied requests we are seeing such as significant loan applications for capital investment projects.”
While strong lending activity is good news for the economy and key to driving the rural surge in demand for land and property, lockdown is just one of the elements impacting the loan market. Tim Parsons continued: “For fear of damaging the already fragile economy, these low rates are unlikely to rise for two reasons. One is in terms of the national debt repayments incurred by supporting the economy through the continuing pandemic. The second is the implications that may come from Brexit which, although has been a bit forgotten with everything else going on, is rapidly become a very relevant issue. Farming profitability in the future could be dependent on whether we get a deal or not with Europe.”
Other than the early shock in the spring, farming has generally continued much as it would have, with the agricultural community adapting to the restrictions and adjusting to new ways of doing things. Instead, as usual, it has been unreliable weather that has made a bigger difference in most regions, with dry weather early in the season and wet in many parts during the months that are usually considered summer.
Despite this, the land market has proven resilient and H&H Land & Estates has reported a consistent wave of successful sales post Lockdown 1. With high demand for farms and land in a prime location, the North is experiencing a rural market bounce with land purchase being a main driver for borrowing.
Tim concluded: “My view is that, in short, with lower interest rates, if you can lock into margins for long periods, this looks attractive. From our side, it’s clear that lenders are still keen to lend for sensible, well thought out and well supported proposals.”