There has been a marked improvement in sentiment in the UK lending markets with the Bank of England’s’ latest Credit Conditions survey showing that availability and demand of credit to real estate has improved significantly over the past 12 months with property consultants JLL expecting this trend to continue.
According to JLL, the traditional lenders in Yorkshire including the ‘Big 4′ high street banks are all keen to lend on commercial property albeit the latest figures produced by the Bank of England (BoE) show that lending to real estate still remains significantly lower than the 2007 peak.
“The lending market is becoming increasingly fragmented with many other specialists in Yorkshire all vying for business,” said Simon Cullimore, head of JLL’s Valuation advisory team in Leeds.
“Well-known names along with lower profile specialist lenders and institutional investors are seeking to expand their property lending business with many willing to move up the risk curve to secure opportunities. As a result of this competition, margins are being driven down and banks are having difficulty placing available capital in the markets even though their funding costs continue to decline.”
Whilst sentiment is improving, BoE figures highlight the continued deleveraging by the banks of their overall exposure to real estate through the sale of historic debt packages taken out prior to the credit crunch. The latest data issued last week by the BoE showed a fall of £2.3 billion in Q2 2014 to £137 billion, which represents 7.1 per cent of UK banks’ total outstanding debt. Examples of this regionally include Yorkshire Bank parent company’s sale of a £625 million package of impaired loans.
