2020 saw the 1,000th client helped by H&H Land & Estateswith a finance proposal through the Agricultural Mortgage Corporation (AMC). The AMC agency started in 1988 when Alan Bowe set up his own business, joining H&H in 1999. The AMC agency has gone from strength to strength over that time and is one of the top performing agencies in the North, now lead by Tim Parsons, Director of Professional Compliance for H&H Land & Estates, and capably assisted by Jonathan Hird, Chartered Surveyor for H&H Land & Estates. Both are based at Borderway, Carlisle, but advise clients across the North of England, Borders and South West Scotland. Tim Parsons here looks back over the last year and the outlook for agricultural lending in 2021.
We saw strong lending activity through 2020 despite the pandemic, particularly after lockdown 1 and through the summer and autumn. As the land sale market was pushed back later into the year so the finance deals were also, with more activity later in the year than we would normally see. Despite the challenges, we have had one of our busiest years for loan enquiries and application in terms of size of loans and numbers.
Borrowing requests are still varied with re-financing and land purchase the two main drivers of borrowing, but also we are seeing significant loan applications for capital investment projects, driven partly by some grant assistance.
So, what are the prospects for finance and borrowing in 2021 as we fight our way through lockdown 3?
As well as the continued impact of the pandemic, we did at the last minute get a Brexit deal, although there still seem to be some bumps to be ironed out at a practical level. Financially the markets had already been pricing in the different scenarios and as such the cost of money has not changed dramatically since 1st January.
Interest rates therefore remain at an historic low and there looks like little prospect of them rising anytime soon. The fear of damaging an already fragile economy is too great and made worse the longer the pandemic continues. There is even increasing talk of some negative interest rates! Even though cost of money is low, lenders margins have perhaps increased a little but overall low borrowing rates are driving activity and opportunity in agriculture. The Agriculture Act, the DEFRA Agricultural Transition Plan and the progress of the Environment Bill may not suit everyone, but they at least provide a direction of travel and a degree of policy clarity which is welcome to financial institutions making agricultural lending decisions. As such, lending to agriculture is still seen as a sound market.
Strength in commodity prices in some sectors has continued from last year into this, despite the pandemic and after the initial shock in March 2020. Time will tell if the new trading arrangements and future trade deals beyond the EU will impact but businesses that are efficient, proactive and think ahead, as the Government is encouraging, should take advantage. As usual it was the weather in 2020 that has made more of a difference, from a dry spring to wet summer and we start 2021 in the grip of a cold snap. One thing is predictable: the weather is unpredictable.
Despite all the turmoil of the last 12 months, some sectors and businesses have been turning in some sound financial results which will help support opportunities and thus borrowing proposals going forward. Many clients are taking advantage of the low interest rates to invest for the future, with a greater number of long term fixed rate and interest only loan applications. AMC is probably the only lender offering 30-year fixed rate loans which look very attractive in what are undoubtedly going to be uncertain times going forward, not only in terms of repaying the national debt incurred in supporting the economy through the pandemic, but also the implications that come from the fundamental shift in agricultural and environmental policy.
In what is going to be an unpredictable future, there are going to be opportunities and those businesses that take the time to prepare as best they can will be best placed to take advantage, securing investment and where appropriate, locking into low interest rates. AMC is very much here for the agricultural sector whatever 2021 and the future brings and are keen to lend for sensible, well thought out and supported agricultural and rural business proposals. They, and we, are working with farmers to achieve their goals in the midst of potentially reducing incomes whilst encouraging farmers to consider their options for the future, whether it’s protecting their business from changes in subsidies, adapting to the need to become more sustainable, or finding new routes to generate income.
- AMC loans available for business purposes only, provided on a secured loan basis. Minimum AMC standard loan £25,001. To meet customer requirements, lending criteria will vary. Lending is subject to status.
