With Commercial Mortgage lenders still very much cherry picking what they will and will not lend on, and then increasing the interest rate margins together with an increased fee structure thank god that we still seem to have short term lenders who if anything have become more competitive on interest rates and charges.
This is not quite what we expect from the this sector of the market when we look back prior to the down turn in the Commercial Property Market where bridging and short term lenders were like drinking in the last chance Saloon, if you did get served the drink it was pretty foul tasting stuff and very expensive.
What the downturn in the market has done is create a niche market for this product, and thank fully there seems to be funds available from a number of lenders with terms that have become more attractive as the Commercial Mortgage drought shows no real signs of improvement.
It is also very noticeable that short term lending which started at one day has now with some providers stretched to 365 days. Developers would have turned their noses up previously at bridging, but have now come to realize that where you are buying property way below the true market value, you can afford to spend a little more on the cost side and still have a very nice profit margin.
These are testing times and it will be very interesting to see how these short term products develop in a changing market as we come out of the downturn where property developers have normal funding available, speed and a very minimum of references has always been the key to bridging and not losing that very important deal where time was in short supply.
Michael Alexander acommercialmortgage4you.co.uk
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( 3 / 120 )I do sometimes wonder if I live on a different planet to the media when I read that the housing market is warming up, there are the green shoots of recovery in manufacturing, retail and people are spending their hard earned cash again.
When did all this happen, I must check that bottle of wine I opened last night to see if it had any very special additives in it. On one hand we have the growing queue at the unemployment office, Lloyds Bank selling off 4 bn in securitised mortgages and now Nationwide securitising some of their loans. The Banks and Building Societies are not lending beyond 90 % LTV even if you are 100% squeaky clean, and if have had any sort of minor blip on your payment profile do not expect to raise more than 80% LTV.
Does this paint the picture to you of the climate of recovery, particularly when lenders are so wary of any risk in their commercial lending, which does not bode well for any sort of recovery in the building industry upon which we rely so heavily?
We in financial services remain as positive as we can in very difficult circumstances and would we miss any realistic signs that lenders wanted to lend, I do not think so.
The pent up demand of first time buyers and those who want to move house for various reasons is massive particularly where we are only able to help around 15/20 % of the clients who enquire, the demand will grow until lenders start to open the doors to the vaults and satisfy the band of discontented potential buyers, and that’s when house prices will take off.
With Commercial Mortgages it is a very similar story with lenders being very picky with what they will lend on and the way in which lenders are increasing their charges both in the interest rate margins and the charges they make to lend money. We are paying a very high price for the BANKS PREVIOUS FOLLY IN TRYING TO GROW AT AN UNREALISTIC RATE WITH NO DUE DILIGENCE AND COMONSENCE BEING IGNORED IN THE RUSH FOR GROWTH.
There is a very long way to go before we can have any real confidence in the economy making a full recovery and we can still have a double bounce to deal with. We should all remain positive but trying to talk up the market when it is not borne out in fact does not help anyone as the banking sector like the politicians have lost the confidence of the general public and we as advisers should talk in plain English and do our best to get the confidence of the public at large back in financial services.
Michael Alexander acommercialmortgage4you.co.uk
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( 3 / 96 )The grand old lady of Threadneedle Street has again left the Bank base rate at 0.5% providing further proof that we have a long way to go yet before we can see any tangible change in the economy.
The Footsie 100 still flatters to deceive with strong growth but very little to back it up. The estate agents and some of our high street lenders would have us believe that the residential market has been positive for some months despite surveyors still wearing their brown trousers when valuing property.
If you believe the rating agency Fitch we still have another 13% or there abouts for the property markets to fall before it bottoms out. As it was Fitch who blew the whistle on the sub prime packaged mortgages in the USA which started the property down turn their opinion must be respected even if we do not agree with it.
With Standard Life stating this week that they would be relaxing some of their redemption penalties on withdrawals from their property fund it must demonstrate that they feel fairly confident about the future of the commercial property market. When a major player like Standard Life who have a massive interest in commercial property give a clear sign that they feel the market may be a little more positive we have to listen.
There will not be a morning when we wake up the birds are singing, the sun is shining and we have just won the lottery and the commercial property market has suddenly gone positive. History tells us that the market will bounce along the bottom for a while until it bottoms out and then we start to see that little miracle as we get a very small positive growth.
With the pent up demand that we have, as soon as lenders decide to lend again when we are into a positive area the market will take off for 12 months and then settle down again for what we hope is another twenty years of growth before we are back in this mess again, but next time around we will be that might wiser and we will not get caught, will we?
Our economy needs a vibrant residential and commercial property market, and how we have wished that it would come back a lot sooner than we anticipate, which is next spring, please god.
Michael Alexander acommercialmortgage4you.co.uk
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( 3 / 103 )Boris Johnson has shown his determination to put his mark on the London Skyline by approving a 63-storey tower on the Isle of Dogs, despite Tower Hamlets rejecting the plans.
The Mayor of London used his considerable call in powers, granted in April 2008, for the first time to take charge of the Columbus Tower planning decision after London Borough of Tower Hamlets rejected it in August.Boris being Boris was not going to let this prime development slip through his fingers.
Conditions attached to the application will see the developer pay £4m towards Crossrail, £1m towards affordable housing and more than £2m to community schemes not quite sure what planet Tower Hamlets are on but was this a development that ticked all the righ boxes and makes a massive contribution towards Crossrail.
The scheme will provide 334,000 sq ft of offices, a 197-bedroom hotel and 74 apartments.
Johnson said: “I believe the application will not only strengthen the success story of the Isle of Dogs, but will be hugely beneficial to the whole of London.
“As well as being suited to the Canary Wharf district with its distinctive tall buildings, the overall size of the development means that it will deliver a huge contribution to the cost of Crossrail, which is central to the continued success and prosperity of both Canary Wharf and the entire capital.
“Considerable sums will also be invested to bring lasting benefits to the local community and therefore I have no doubt that this development must be allowed to go ahead.”
You do have to question whether our previous Mayor would have been so bold to have forced this development through as not to be dictated to by planners who may not always have the future of London at heart, well done Boris.
Michaek Alexander acommercialmortgage4you.co.uk
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( 3 / 108 )If you read the daily papers you cannot have missed the Nationwide or the Halifax claiming that the residential property markets are in recovery. This is a fairly broad brush statement as we all know the South of the country tends to be the thermometer for the rest of the UK as the downside starts from London and the ups side starts from London, the rest of the UK will follow in various degrees.
There is no indication what part of the UK is going up each month, and if this the case why are the surveyors not reflecting this positive change in their valuations. Maybe because the surveyors have got more sense than to get caught up with the hype in trying to talk up the market when the demand is most certainly there, but if the lenders are not lending, not much will change.
Oh god I do hate doom and gloom but when you are saying no to 8 out of ten mortgage enquiries because we cannot place them due to lending restrictions talk of rising prices is just that talk with no substance. The pent up demand for residential mortgages is horrendous, and when the lenders doors do open just a little to allow a shaft of lending sunlight the market will almost certainly take off as it did in 1996 following the last downturn. It will settle down again after the honeymoon period, but that first year is likely to see some real changes in property values, and boy do we need it.
The worry is at present that having seen a real positive run on the Footsie 100 coming from 3800 to around 5200, are we going to see the dead cat bounce with a double dip in 2010. The markets seem to be very positive when there is nothing to back up this rise in the stock markets. To over cook the market now would be a disaster; we need a nice slow recovery with no nasty dips to spoil our fun.
The FSA. are not helping our cause with the new banking rules which would require lenders to stockpile up to £106bn of extra government bonds, and to reduce the reliance on short term funding. With the banks not talking or trusting each other short term funding is not likely to be an option in today’s market.
In truth we do not expect lending to change in 2009 but it will be a very gloomy year in 2010 if the brakes do not come off lending. We need to see funds being made available for residential mortgages, commercial mortgages, commercial finance, and business loans, the knock on effect to the retail sector that rely on a healthy property market to sell the associated products would be massive. The building industry have had a long holiday and it would be nice to see the sites coming alive again, with the builders bums that we all love to laugh about, they will be a welcome sight.
Banks and lenders may have to be retrained as they have become so used to finding every which way to say no to our application for a commercial mortgage and finance that smiles may return to banking, because they can now say yes.
Michael J Alexander acommercialmortgage4you.co.uk
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( 3 / 116 )After two weeks being very lazy on a sun drenched beech on the Island of Rhodes in a small resort called Pefkos, which is not so cheap anymore due to the strength of the Euro against the Pound I had hoped and prayed that the commercial property market would have taken off, the residential markets would be flying and lenders would be lending, and then I woke up as the plane was coming into land at a very cold Gatwick Airport.
Well despite some rumblings in the Press from lenders who should know better, that the residential market was on the up, (if so lenders then why are you not instructing the surveyors to start valuing the properties up, instead of looking for any reason to down value.) Unless the words of wisdom come from the very top in big bold letters, are surveyors going to stick their collective necks out and kick-start the market all on their own. I do not think so, as too many of them remember the last recession, and being sued for an optimistic valuation when the client defaulted is a costly exercise, and not one any surveyor would wish to repeat.
We do get fed up with saying no to clients when in normal circumstances we would have said yes with confidence that we would find a lender who would help us and the client. The standard of service given by some of our high street lenders beggars belief, and you have to wonder how these so called BDMs will cope when they get busy. If you are giving a very poor level of service now when you spend most of your time saying no, what will happen when you start saying yes?
The crystal ball we call the market, indicates that we should be going positive in 2010, and the knock on effect in the economy will be very welcome. So you lenders and banks let’s have the application forms at the ready with some half decent lending criteria, together with surveyors who are allowed to value up and off we go again. Lunch hours will return employees will feel that they can take a holiday or go sick only to see the dreaded P45 awaiting their return.
A smile will return to the commercial lending area and IFA’s like me will enjoy coming into work in the morning because we know we can make a difference to client’s lives when we have access to commercial mortgages, commercial finance and business loans. A small request to the powers that be, but what a difference we as professionals can make when we have all the tools of our trade at our disposal.
Michael J Alexander acommercialmortgage4you.co.uk.
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( 3 / 113 )Redrow report the worst set of trading accounts in their history, with sales down some 54% on the same period in 2008 and the Halifax are trying to tell us that house prices rose by. 8% last month and Ray Boulger a well know industry spokesman voices the opinion that house prices may rise by up to 6% in 2009.
Meanwhile down here on planet earth first time buyers who have a 100% squeaky clean credit record can only get up to a 90% LTV mortgage and with a minor blip on the credit file 80% LTV.On the commercial front most lenders want at least 30% deposit going in from the client and more in most circumstances.
If this seems to be the climate in which house prices can rise who is kidding whom. Yes we would all like to talk up the market and when the market has bottomed out and we go into positive growth I will be more than happy to play my part in talking up the market.
But let us talk with honesty and clarity, the overall property market is still falling but has slowed down and should bottom out by the end of this year with any luck. But the major fly in the ointment is the lack of funding in both the residential and commercial markets. So you all you lenders stop talking rubbish and mudding the waters start lending now and the market will recover sooner than later.
We do not want a return to lending at any cost, and to every Tom Dick and Harriett who should have never had a mortgage in the first place. We need to get back to lending at 95% LTV and let’s have a bit of commonsense in the underwriting; just because someone paid their credit card one day late does not make them a criminal in lending terms.
Clients who do not pay and go into debt management, or into an IVA or declare themselves bankrupt, or run up a stream of CCJs, must understand that they cannot come back into the market and be treated like any other normal client. We have made it all too easy now for clients to walk away from their responsibilities and this culture has to change in order that the good clients are not being penalized.
So Mr Brown if you want to get back into power may I suggest that a great deal of your energy should be spent in trying to get lenders to lend particularly those to whom owe the country their very existence. Mortgages, Commercial Mortgages Commercial Finance, and Business Loans, there you are Mr Brown not too difficult is it.
Michael J Alexander acommercialmortage4you.co.uk.
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( 3 / 103 )On a day when the Bank of England hold the base rate at 0.5% for the sixth successive month in a row, anyone looking to purchase residential or commercial property must be looking at the most attractive period in which to buy within the last 20 years.
With low interest rates and with no sign of them going up in the immediate future and with Redrow reporting the worst trading results in the company’s history, what a fantastic opportunity to get into the property market.
Even one of the friendly Dragons from Dragons den have announced their interest in commercial property and stated that the time was right to get on board before prices started to rise and yields began to fall.
Brent Cross have finalised an agreement this week which will see £1bn of funds required to create the new north west London town centre. So we have the will and the demand, what’s the problem. Our lenders are the problem they just do not want to lend, and without them any chance of an early recovery are on hold. If you are reading this Mr Brown and Mr Darling, please get your big stick out and give the banking boys some thing to think about, if they do not start lending soon there will not be anybody left to lend to.
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( 3 / 108 ).Following a good day on the Footsie 100 we have broken the 5000 points barrier for the first time since we went into recession which we hope bodes well for the future as investors come back into the market with some confidence that gains are to be made
Some of this new found enthusiasm is no doubt due to the possible sale of Cadburys to Kraft which would make two global brands even bigger and would offer economies of scale and open up new markets as each brand feeds off the other markets and expertise.
Where does all this activity on the stock exchange help us in the commercial property and finance markets? Well one word which can bring about a complete change of attitude by lenders which then feeds through into property investors and clients who wish to move to larger premises and buy the freehold, its called CONFIDENCE.
Can one word have so much power, you can just bet your last shilling on it. When the lenders have confidence they will start to lend and the wheels of business start to turn again, because what lenders now see as risk, starts to disappear when property prices start to rise and their equity in property increases.
Property prices are still falling but not at the same rate as we have had over the last two years. We expect that prices will stabilize at the end of this year and maybe into spring 2010. But after that history tells us that prices bounce along the bottom for two or three months and then they start to climb. When that happens and the confidence is back there will be a real explosion in prices held back only by the lack of quality property on the market and the availability of funds.
With a fair wind, the mainsail and spinnaker out we should start to see the return of COMMERCIAL MORTGAGES, COMMERCIAL FINANCE AND BUSINESS LOANS, do I hear cries of shock and horror, the Banks are lending again, well maybe but not just yet
Michael J Alexander acommercialmortgage4you.co.uk
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( 2.9 / 109 )Have we seen a little chink of light coming through the Iron Curtain which seems like the cold war in commercial mortgages, well if there is a chink of light it’s being very well hidden, because as a commercial mortgage broker someone up there appears to be turning the screw even tighter?
The real activity in the commercial property markets seems to come from cash rich clients who do not need a mortgage to enable them to purchase, and this would again seem to be the same in the residential market in and around London.
It is in everybody’s interests for the property markets to recover, and yet the Banks are still unwilling to start lending which would in the long term help themselves as they would benefit from rising prices which would increase the equity in property and bring down the Banks exposure to risk.
Having thrown money at clients who should have never been given the facilities in the first place the Banks still cannot see how they can help themselves by aiding the recovery by lending. Lending to clients with a bad credit record and those who have not serviced their commitments in the past is always a risk and this exposure to the dog end of the market should have been limited at best if not avoided like the plague.
Hindsight is a wonderful thing and as Winston Churchill once said the further you look back the further forward you can see, wise words from the great man. History tells so much, if a client is not paying their existing mortgage, credit cards and loans, what makes you think that by lending them more money at a higher interest rate they will suddenly have a lifestyle change and start paying. What do they say about leopards?
What we need is a new breed of Bank managers who are there to help and advise and to lend where it is appropriate. Bankers who lend merely to boost up their lending and to qualify for a large bonus and get promotion do not help the bank or the client. We must have access to commercial mortgages, commercial finance, and business loans because without them there will be no recovery
Michael J Alexander acommercialmortgage4you.co.uk
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