Commercial lending appetite is growing but challenges remain – Nyirenda

I have recently had presentations with high street lenders such as NatWest, Barclays and Metro, which are keen to step up their lending aggressively while still offering keen margins as rates come down, although their loan to values (LTVs) remain on the conservative side.

The usual challenger banks such as Shawbrook, Aldermore and InterBay have been amending their stress tests and other mechanisms to increase the lending amounts and LTVs.

Some of the private banks are also increasing their appetite in the commercial mortgage space, with the onus still on the background sponsor being the type of client they would want to onboard and offer other services to.

Another welcome addition has been traditional short-term lenders entering the commercial term market. Lenders such as MT Finance and West One Loans have recently launched commercial term propositions to supplement their buy-to-let (BTL) term lending books, where the margins are better.

MT Finance appears to be targeting some of the lesser support sectors such as care homes, industrial, logistics and leisure. Covering these types of security is often difficult to finance and presents a very welcome opportunity for brokers.

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West One Loans is similarly suggesting it is “sector agnostic”, with the only commercial sectors it is currently not keen on being ones that carry potential reputational risks, such as care homes.

For MT Finance and West One Loans, pricing starts in the late 7s for the headline rates, but mainly 8%-plus, which puts these lenders just behind some of the established challenger banks, while suggesting more flexibility in taking views on experience and credit issues.

Brokers want lenders to ‘offer something different’

From a broker’s perspective, we have been looking for lenders to offer something different in the commercial term lending space. LTVs are important, but if the stress tests or rates are not low enough, LTVs are irrelevant at the moment.

A few lenders, like Metro Bank, have actively topped up the property loan with a trading loan to increase the overall total LTV.

Some other lenders are offering particularly high LTVs, above 80/90%, for certain “safe” sectors such as dentists and pharmacies.

We would like to see more lenders not solely lending on vacant possession. Lending on open market value (OMV) for established commercial properties with a strong tenant or experienced investors would be a welcome addition.

Lenders more open to lending on newly built or renovated commercial properties, especially for experienced investors, is another area under-served in the market.

It would be great to review the new lenders after 6-12 months to see if they have managed to get some decent lending out of the door. There are other big lenders watching carefully that have stated they are looking to enter the commercial space in the current months.

We await with bated breath.