A benchmark survey of Britain’s commercial property lending has shown a tightening of loan terms across the market. The survey said there was a reduction in the number of lenders prepared to accept loan-to-value ratios above 85%, from 57% in 2001 to 42% last year.
The report, sponsored by the Bank of England and 56 commercial lenders, found lenders increased their margins for the second year running. Only 48% were prepared to offer funding below 1% above LIBOR in 2002, compared with 60% in 2001 and 70% in 2000.
Bill Maxted, senior lecturer at De Montford University and co-author of the report, said: ‘I think that lenders are quite cautious at the moment and our overall feeling is that lending practices have been conservative, therefore any upset in the market would have to be sudden, rather than gradual.
‘The majority of respondents have tightened up in the last year but there are still one or two lending quite freely.’
However, Michael Rashman, director at Prime Finance, pointed out that the slack is being taken up by specialist lenders. He said: ‘Mainstream banks are lending to certain criteria, on certain properties, in certain parts of the UK, this is increasing the number of non-mainstream lenders, and making them more prominent.’
Maxted also felt there were many more players in the market ‘ people who historically have been in equities. ‘We feel that it is probably the case, but we only asked this for the first time this year, so we have nothing to compare it with. Anecdotally there seems to be a lot more private individuals in the market that would perhaps normally be in equities,’ he said.
l Report available from De Montfort University on 0116 257 7222