Increased competition between lenders and varying regulatory regimes continue to drive loan to values (LTVs) up and interest rate margins down, with prime investments and areas where there's competition between lenders seeing the greatest falls in margins. Increasingly, lenders are driven by IRRs and these are going down too. The result is an increased willingness to lend in the regions, to secondary properties and in alternative sectors.
We’ve also seen lenders increasingly using ‘loan sourcing agents’ such as Laxfield Capital which now has mandates from five lenders. Hatfield Phillips and Situs offer similar services.
Because of the diversity of lenders and loan terms on offer, it is becoming difficult for borrowers to identify the best sources of finance. Consequently, borrowers are turning more and more to property finance advisors who can supply an appropriate line-up of lenders and competitive finance quotes. This is important given varying borrower objectives and business plans. A leading player in the field is Eastdil Secured, the real estate investment banking subsidiary of Wells Fargo, who act for a number of global investors.
Are we back to 2006/7? I’m certain we’re not - LTVs and margins are nothing like the levels they were then. And the fact that established lenders are continuing to capture such a substantial market share despite the competition is, I believe, most comforting.
Savills at MIPIM
Visit Savills at Zone A Riviera. Each day we will present a daily report from the show, focusing on the retail sector, the commercial sectors in the UK and the residential investment market.