Down valuations hitting development lenders’ arrears – Funding 365

The bridging lender told Specialist Lending Solutions that it was receiving more enquiries about exiting development finance as existing funders were not able to extend.

And it noted that property prices had been most seriously affected in London where there had been a “soft collapse” in some prime or near prime areas of up to 30%.

Funding 365 managing director Michael Strange said the lender was seeing more down valuations “across the board”.

“Market moves can be quite serious, with central London down 30% in relatively prime areas,” he said.

“There are generally lower property values and people are gazundering.”

Significant potential losses

Strange highlighted that lenders doing 75% loan to value (LTV) deals with a lot of down valuations would find it “almost impossible to exit those loans”.

He acknowledged that not many lenders published their arrears figures but noted that some of those who did were showing “pretty significant potential losses” which could result in concerns about future funding streams.

“We have been seeing an uptick in development exit funding enquiries in last 12 months,” he continued.

“You can only imagine two years ago the development funder would’ve extended the loan but these days they can’t extend anymore and have to get debts off the book.”

He added: “I suspect it’s going to be an interesting 12 months as people work through it.”