Commercial property lenders in the UK are confident about the year ahead, even though the country’s upcoming exit from the European Union is at the forefront of most lenders’ minds at the moment.
The latest research from Link Asset Services has revealed that almost three quarters (72%) of commercial property lenders predict that the volume of new loans will increase over the next 12 months, while 53% expected that they would expand the size of their teams as a result – a sign that confidence in UK commercial property is strong.
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When lenders were asked what their most pressing concern was for the year ahead, perhaps unsurprisingly, 70% put Brexit as their top worry, as the political situation in the country continues to be mired in uncertainty after the date for the final exit was set for 29 March 2019. However, the market proved its resilience with only 2% of lender saying they expected lending volumes to fall in 2018.
Most lenders surveyed expected loan margins to remain largely unchanged, although 71% expected interest rates to rise this year. With the Bank of England expected to make further increases to the base rate this year, most borrowers are already poised for future interest rate hikes.
Adapting to change
James Wright, head of real estate finance at Link Asset Services, said that one way in which lenders had adapted to the political risk environment was by “doubling down on low-risk senior finance”.
He added: “We have seen margins lower on senior debt, but rising on riskier lending products. In addition, this year lenders want to do relatively more lending in commercial sectors in comparison to residential, where they see greater risk to values in the year ahead.”
The time it takes to get a commercial property loan now, according to the Link Asset Services research, is 53 days, whereas it took an average 43 days a year ago. This is largely down to the latest regulatory changes linked to property financing, which is slowing the processes down.