Commercial Route Blog

With economies around the world cooling in recent months and the squeeze in the British minds, it has been suggested that the Bank of England will not be likely to increase the base rate until the second quarter of next year.

A recent poll carried out by Reuters of 60 economists indicates that the MPC will be more concerned about the overriding effect of the US downturn and the effect it will have across Europe.

Although Britain’s economy did expand in Q2 by 1.2% , its fastest pace for nine years, analysts expect this to shrink to 0.3-0.5% in each quarter through to the end of next year. Retail sales and consumer confidence figures over the last month have been buoyant, but business surveys of the private sector support expectations for a slowdown.

In July inflation still remained at 3.1% way above the 2% target, but again this will be less of a concern than the slowdown itself. The £200bn quantitative easing programme, it is suggested will remain as is and the poll suggested analysts believed that this would not increase.

Lending

With lending still available, it is still a task to satisfy the “New World” of stringent underwriting and although there are many that would sail through, there are the increasing numbers hitting a brick wall.

Commercial property prices and rental yields have decreased to what pundits believe will be the low point. Any business currently looking to rent space would find they are in a great position to tie down a long term deal according to The Mortgage Merchant.

To find out if The Mortgage Merchant can help you, your clients or anybody else you know, call them on 0845 456 1980 or email them at info@themortgagemerchant.co.uk

“All I want is 1% above base and 75% loan to value”

It is becoming ever clearer that commercial “lending” itself should be at the forefront of any borrowers mind rather than high loan to values and pre recession rates.
With the banks and building societies still being cautious it is time to realise that alternative lending solutions should be implemented by business owners for their cash flow and lending purposes. The Financial Services Authority has recently looked at the commercial market and has overseen the immediate to short term problems as below.

“With loans and debt maturing over the next two years, borrowers are unable to refinance as easily with reduced valuation and surveyors being extra vigilant when providing reports. With approximately £160bn of the £225bn total debt outstanding maturing over the next five years, the impact of such a cycle on the UK banking sector and broader economy could be severe. Whilst uncertainty is rife amongst banks and there is no confirmation of lenders’ future capital and regulatory obligations, they have no incentive to increase lending. This is especially true with higher risk lending as that is a vital component in a recovering economy.”

So What Now?

SME’s should look outside the box and exploit different lenders’ criteria rather than staying with their current lending or banking sources. Yes it is true a relationship can hold great gains but we are failing to realise the true value of the banks. In these difficult times lenders have started to enforce “paybacks” to reduce their risks. The relationship no longer has the ability to mandate “the lend” and instead this is now left to someone who does not actually know you, and hopefully the borrower has been put forward in the best light possible to them.
With the National Association of Commercial Finance Brokers self regulating the commercial lending sector, you can be assured that you are dealt with professionally. Is it time you looked to help yourself or your clients to achieve what is right for them and not for the banks?

by Mo Chishti, Managing Director of The Mortgage Merchant
To find out if The Mortgage Merchant can help you, your clients or anybody else you know, call them on 0845 456 1980 or email them at info@themortgagemerchant.co.uk

The Mortgage Merchant is a customer focused Financial Consultancy with specialist commercial, residential and insurance departments. Operating form Bedfordshire, Cambridgeshire and London, The Mortgage Merchant offer their clients a complete package and accept introductions to support clients from other market professionals. The Mortgage Merchant is here to support and service their clients through their dilemmas and to benefit them.
The Mortgage Merchant is authorised and regulated by the Financial Services Authority.

With lending going back to where we were 30 years ago, how are lenders behaving?
The saying ‘a bank is an institute that will lend you money if you can prove you don’t need it’ has never been so true.

The rollercoaster of lending over the last decade could finally have had a more permanent effect. With the last 18 months of volatile lending, global banks have looked at the importance of simplicity and a back to basics approach for risk and liquidity management. For 2010 banks are looking to implement this new cautious approach globally to drive the stem of growth back into the economy, while still competing with the new banks such as Metro Bank.

With the new liquidity regime introduced by the FSA late last year, banks will also need to keep their ‘house in order’. However, with the departure of their Chief Executive, they still await to see what compliance awaits them. With this, liquidity for banks and lending institutes will still be of high priority over the coming year.

The FSA Chairman, Lord Turner, had recently called for a crack-down on commercial property lending in the wake of the nearly collapsed HBOS. Turner said 80% of UK Credit is either residential housing or commercial real estate. He stressed on policymakers to consider ways of increasing loan rates or tightening borrowing terms to ensure money flows into more useful sectors.

With the tightening of liquidity and the “hand” of compliance coming down, it is still difficult to say when the UK economy will see growth in the commercial sector. With a 1% decrease in average house prices February to February, according to Nationwide’s House Price Index, but a 1.4% increase in London commercial prices according to Reuters, uncertainty is still in the air. As the proverb goes “there is nothing certain but the uncertain”

by Mo Chishti, Managing Director of The Mortgage Merchant

To find out if The Mortgage Merchant can help you, your clients or anybody else you know, call them on 0845 456 1980 or email them at info@themortgagemerchant.co.uk