Well thank goodness for private investors because they are the driving force behind short term and bridging finance, and now Development Finance at the top end of the market. With funds available starting at 8 mill with no upper limit, and interest rates at Euro base plus 2%, we may just see a few new building sites looking very active indeed, and long may it continue.
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( 3 / 126 )When we are looking for a commercial mortgage of finance to help our clients, we have to broaden our field of vision away from the more traditional soucres of lending. The high street banks have had all their own way for some time now and with the compacting of the lending market we have to look in other areas.
There are still specialist banks and building societies who will just look at the commercial loan and leave the day to day banking to the high streets. We do not have the level of choice or competition left on the high street anymore, and the government may one day look back and rue the day when it encorouged in a very positive manner one bank to tie up with another. Competition is vital in banking and we are starting to lose that edge that we have had in the past with a wide choice of lenders.
Commercial brokers now have to work that much harder to find friends and establish relationships in our industry, which in the current climate is cautious to say the least.There are lenders who will help you will have to do your homework, and make twice as many calls but it will be woth it.
We need as much choice as we can get for our commercial loans and finance, but we may just have to turn into miners to dig out all the lenders, who have been sitting just beneath the radar, come on guys we need you.
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( 3 / 123 )Bridging finance which has been the saviour of the commercial and residential lending market, is one product that most of us in financial services are now used to using as an everyday tool of our trade to help facilitate tranactions to take place that might have got stuck in the banks indicision tray and the deal falls by the wayside.
We noe should also be looking at short term finance, 6 months to two years with some lenders to obtain a little breathing space and allow the business to recover. Invoice discounting and asset finance are fast becoming tools that we may consider to ease cash flow, or to replace ageing machinery.We now have choices that we may not have looked at in our previous life when money was there on demand, and we did not have to dig too deep in our box of financial tools as the banks were falling over themselves to lend. Times are now a little different and we have to work that much harder to get that extra bit for our clients at the right price.
It does mean that we will have to think outside the box and consider products that we would have dismissed out of hand, but business needs cash flow to survive, and we now have to use all the tools in our financial box to help our clients to grow in this very difficult market.
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( 3 / 190 )Have all of our problems on funding commercial mortgages disappeared now that RBS are supposedly splitting into a good bank and a bad bank, we can take our pick and if we have any credit problems we can go and dump them in the bad bank. Would it not just be better to admit once and for all time that you as bankers have failed and having thrown the rule book out of the window and abandoned the one rule we should always apply, commom sense, we as a nation are having to pay for your mistakes. Most of the fat cats still have jobs or pensions that will mean that they will no longer have to seek gainful employment, and we have to grin and bear it.
In any other industry or workplace dismal failure means the sack and in most cases all the benifits that went with the job. Justice here is not seen to be done.Hiding your mistakes in lending decisions in a bad bank seems to be the claasic, hide it and pretend its not there and it might go away. Wake up and smell the coffee lads and lassies. the smell is a toxic one and you cannot hide this one with a little air freshner and by playing hide and not seek.
We need lending to return to normal sensible levels, and not to have to call in the storm troopers to do battle with the credit committee. A new application for a commercial mortgage is excactly that and shoulf be judged on its merits. Some of the underwriters in commercial mortgages and finance seem to be sitting on their hands rather than make a decision which may prove to be wrong. We have to get the balance in commercial lending right, not gung ho, we have done that bit and look where it has got us.
We all know what is sensible lending and thats what we have to return to, 75% LTV with the ability to service the debt, good management, business plan and forecasts that are in keeping with the particular industry. Historical accounts may not give the whole picture, but its a clear guide and should not be ignored.
New start ups should be encorouged, and helped where possible, but the client must accept their share of the financial responsibilty if it all goes wrong. If the client is so sure that its going to work lets see some of their money and gaurantors, it helps to focus the minds when you can lose as much or more than the bank
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( 3 / 127 )Do we see a slight thaw in the Banks attitude to commercial lending, they are certainly not rolling out the welcome mat but good quality clients that need a commercial mortgage at low loan to value with all the right boxes ticked and the ability to service the debt being demonstrated, lenders are giving us a fair hearing.If there is any element of risk within the application it is unlikely to get the nod of approval, presentation is still the key to success with lenders. What underwriters dislike is having bits of information on the drip feed.Get all the information that the lender requires up front and you will stand a much better chance of seeing the smile on the underwriters face when they say yes.
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( 3 / 154 )Will the extra help that the government have promised to help bail out our poor and impoverished Bankers see them starting to say yes to lending instead of no or come back next year. Is there any real teeth behind the help and how will the bond work that provides the gaurantee for the loan in order that the banks have very little or no risk in providing commercial mortages to small and medium sized businesses.Well watch this space as we monitor the banks reaction to the bail out and if this starts the lending engine with a smooth powerful roar or splutter, splutter.
Michael Alexander
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( 2.9 / 196 )The current market conditions do not appear to have put off the more experienced Investors, and the interest in building up the property portfolio is still very much alive, despite the fact that we still expect property prices to fall by as much as 10% in 2009.
Some very hard bargains are being made when vendors want to sell, not just because of where we are now, but because you have to factor into the purchase price the further fall in prices that we all expect this year. Where clients are selling and buying, the pricing should even its self out across the transactions. But where you are forced to sell the loss on the sale of the property is a very real one. In life however some ones loss is another Investors gain, and the opportunities to build up a portfolio of buy to let properties has never been better.
You will certainly have to put down a 25% deposit to get an attractive mortgage product, and the rental income stress test is making life a little difficult on some deals, but we are spoilt for choice are we not. This is a buyers paradise, and we will not see opportunities like this again until the next down turn in the property market in 2030 ?
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( 3 / 209 )Buy to let booms in the UK for the 2nd year running, and has become so popular everybody is talking about it
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( 3 / 194 )Welcome to the new and updated commercial mortgage website. A Commercial Mortgage 4 You now features some of the best tools, news, information, updates and RSS feeds around.
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( 2.9 / 148 )Should you remortgage now, or wait until the credit crunch is over? Neil Faulkner has conducted an experiment to find out.
Many people are actually paying less by sitting on the Standard Variable Rate (SVR) than they'd pay in an introductory mortgage deal! These are strange times.But what if house prices fall? Right now you might be borrowing less than, say, 80% of the value of your home. But in a few months your house may have fallen in value so that you're borrowing more than 80%. This makes you less attractive to the lender so, consequently, remortgaging in the future is likely to be both more expensive and more difficult.
I'm going to run a series of experiments on this matter to see whether it's worth switching from an SVR to an introductory deal now, even if that deal is initially more expensive.
How I'll bubble the beakers
I'm shortly going to get on with my first test. In all the following examples, I'll use a £100,000 repayment mortgage with 15 years remaining. All the deals will be for five years with no extended get-out penalties. I don't have much space so I'll just compare fixed mortgages. The only element I'll vary in my examples is the house price.
I won't compare the interest rates of these deals, because that would exclude the cost of fees. Instead, I'll compare mortgages by telling you their true cost over the length of the deal, including interest and fees. (I'll estimate £250 for legal costs, where appropriate.) I might say, for example, that the best deals cost you £50,000 over five years. Using the true cost like this is the simplest and best way to compare mortgages.
In order to compare introductory deals to SVR mortgages, we need to know how much the latter cost. Hence, I'll now give you two SVR mortgages:
1. Anyone being charged 4% interest for their £100,000 SVR mortgage will pay about £44,500 over five years.
2. Anyone being charged 5% would pay about £47,500 over five years.
These figures are assuming the SVR remains the same for the whole five years, which is quite an assumption, but also a necessary one.
The 70% threshold
First, let's take a look at examples for those of you who currently are borrowing less than 70%.
Let's say your house is worth £155,000. (Remember, in all my examples your mortgage is £100,000.) This means you are borrowing a little less than 70%. Some of the best deals would now cost you £47,500 to £48,500 over five years, with Coventry, Clydesdale/Yorkshire Bank, Principality BS and Britannia BS among the cheapest lenders.
But what if your house drops 10% in value so that you're borrowing more than 70% of its worth? It's now worth £140,000 when you try to remortgage. Assuming the best rates are still similar to today's, your mortgage would still cost you around £47,500-£48,500, although there are slightly fewer lenders competing at the top. These lenders include, again, Yorkshire Bank, Principality BS and Britannia BS.
After my first experiment, we find that the difference is negligible. Getting a fixed deal costing £47,500 doesn't compare well if you have an SVR mortgage of around 4%, which costs £3,000 less at £44,500. However, it compares OK against a 5% SVR, which is also £47,500 over five years. And of course your SVR could rise in a year or so, while the fixed rate will stay the same through the next five years.
Still, as rates aren't likely to rise in the next few months, it seems to me that people who are in danger of rising above the 70% threshold don't have to rush their decision.
The 80% threshold
80% is a key figure for many lenders, so I thought we'd see something more startling. Compared to the 70% threshold, the best deals were around £1,000 more expensive at £50,000, and there were slightly fewer lenders offering around the top rate, but otherwise results were broadly the same.
The 90% threshold
Now you have a £115,000 home, so that's less than 90% you're borrowing. The cost of a deal is £51,500-£52,000 over five years. If your house price drops to £110,000 -- more than 90% -- you'll find that perhaps just three lenders offer any kind of deal at all. Expect to pay at least £58,000 now, which is what Abbey would charge you.
If you have a mortgage that's likely to drop below 90%, you might benefit from remortgaging, but paying £51,500 is a hell of a premium to pay compared to the £47,500 that you're likely paying now. Your SVR would have to rise extremely steeply inside the next two years for the switch to have been worthwhile.
So...?
So now you know. Most of the results are not thrilling, but it was worth looking into.
I wouldn't panic if you're on a cheap SVR. It'll likely be some time before interest rates start to rise. It would certainly be a shock if the Bank of England Base Rate rises this year, and I'd even be a little bit surprised if it rose inside 18 months.
Consider how much money you'll save in the next year simply by staying on the SVR. Think about overpaying on your current mortgage, rather than paying extra in a remortgage.
That way, you’ll build up a larger equity stake in your home which, as we have just seen, is vital for getting a good deal in this market.
Mind you, in a few years, lenders will probably compete harder, and offer better deals at 90%. My main worry would be if mortgage lenders decide to raise the SVRs this year even if the Base Rate doesn't go higher. That's just a possibility to consider when making your decision.
Source: www.fool.co.uk
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