From house prices to elections, 2024 is going to be a wild ride for lending

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What a year we have ahead of us in 2024. Elections in the UK, US and elsewhere, along with geopolitical flashpoints and technologies including AI are set to have a very real impact on all our personal and working lives.

Here are my predictions for the year ahead. Strap yourselves in – 2024 is going to be anything but boring. 

1. Scared consumers will delay financial decisions

Trust in the Government is already low. The 2023 Edelman Trust Barometer, for example, found governments are typically viewed as unethical and incompetent.

But consumer confidence and trust in the government and institutions is set to fall further in 2024, in a year dominated by political news. 

There will be US and UK elections marred by disinformation, AI deep fakes and false narratives on social media. It’s a terrifying thought. In the UK, the recent viral deepfake audio clip appearing to show Labour leader Keir Starmer swearing at staffers is just the start.

At the same time, as the Conservative government fights tooth and nail to continue to bring down interest rates and grow the economy, it’s likely the Bank of England’s independence against political interference will increasingly be called into question. There will be growing questions about who is pulling the strings to control interest rates. 

In such an uncertain world, as well as a reluctance to cast a vote, people will be left wondering, what and who can they believe? This uncertainty will mean they lack the confidence to make big financial decisions and may postpone commitments such as buying a home or a car; or reduce borrowing or opt for smaller loans. This could lead to a decline in demand for loans and contribute to a further economic slowdown.

2. Funding for lending businesses could dry up

After Russia’s invasion of Ukraine and the Israel-Hamas war, the financial markets are poised for more conflict and geopolitical upheavals. It won’t take much of a shock for panic to ensue on the markets.

Growing tensions between Taiwan and China over the island’s sovereignty could be the spark in 2024, especially as Taiwan holds a crucial presidential election in January.

There would of course be widespread consequences, if tensions were to grow between the pair. One of these consequences could be a slowdown in the extent to which funders will put money into lending businesses. If this were to dry up, lenders would in turn face difficulties in providing loans to individuals or businesses in need. It would be a situation with broader implications for the economy, and the flow of credit.

3. The government will step in to support house prices

The national pastime of commentating on the state of the UK property market has kept us all occupied over 2023. Views on whether the market is up or down vary on the index and commentator.  According to Nationwide Building Society, the average UK house price fell 3% in the year to October 2023, as high interest rates impacted demand for homes, and pushed sellers to cut their prices.  Perhaps the price cuts fuelled the unexpected three-month high in mortgage approvals for October as reported by the Bank of England.

So what of 2024, up or down – or perhaps a rollercoaster ride of emotion? Only time will tell. But given house prices are such a bellwether of consumer confidence, they are likely to become a big part of the political debate as the UK election approaches. No government wants to go into an election bearing responsibility for significantly eroding the value of many Brits’ most precious assets – their homes.

So, if house prices keep falling before the nation goes to the ballots, we can expect the government to announce measures that will support prices.   Perhaps this will manifest through some influence on the BoE around base rates which supports my view on pressure on the Bank’s independence.

4. A new, virtual consumer channel will emerge

Both Apple’s Vision Pro headset and Meta’s augmented reality glasses project, codenamed Nazare, are planned for release in 2024. 

These products will further the physical and virtual worlds and could pave the way to new ways of working. 

This won’t happen suddenly in 2024 (not least as the Apple headset is tipped to cost around £3,000 at launch in the UK). 

But it will be the start of what will eventually become a new customer channel, developed by fintechs and used in financial services and beyond, where consumers become comfortable dealing with automated, AI-powered avatars through AI.  We’ll see where this ends up in the years to come though I’d predict a significant shift in consumer interaction.

5. AI hype to AI action 

Who predicted generative AI would have such an impact in 2023? But where 2023 was a year of huge hyper around AI, 2024 could be the year where it is more firmly put into action. 

Thinking of the financial services industry, there is still some reticence about how to make the most of AI to fulfil its potential for improving customer experience, complying with regulatory requirements and cutting costs.

But in 2024, companies will start to become bolder and race to put AI solutions into practice and use it to take a competitive advantage. Meanwhile, expect any new product or solution to come out of fintech or financial companies to have an AI badge. 

Certainly, at Lenvi, we’re exploring AI to improve the efficiency of our teams, support vulnerable customers and build better customer experiences.

6. Fintech Merger?

The funding markets are increasingly volatile.  Despite the oft-repeated argument that private equity is sitting on a wall of cash just waiting for the right opportunities, it has proven harder for emerging fintechs to extract the cash over 2023.  Cash is being preserved and prioritised for follow-ons to existing investments.  Inevitably, that will curtail the number of start-ups that get traction and have ramifications for the UK as a fintech beacon.

Worse though, I predict investors will lose patience with certain existing investments that see their pathways to profitability lengthen further.  This will force ‘mergers’ at best, a veiled takeover of an ailing business, and closures at worst as portfolios are either moved to the exit lounge or liquidated.

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