E1 Commercial's Weblog

Bank interest rates remain at 0.5%

e1commercial — Mon, 08 Aug 2011 12:48:11 +0000

Base rate remains at 0.5% and commentators suggest it will not change this year. We have seen swap rates with 5 year Libor at 1.94% and 3 yr money at 1.44%- really low rates by historical standards.

Banks miss leding target

e1commercial — Mon, 08 Aug 2011 12:42:59 +0000

Not quite magic then…? project Merlin was meant to encourage/coerce the big five lenders into lending more to small businesses. However they fell short by £1bn in the first 6 months of the year.

In fairness they apparently lent £37bn- although I do wonder on some of these numbers- how much of this is totally new money… and how much is say an old loan ( existing) – repaid and a new loan created over a different term/interest rate- perhaps clearing an overdraft at the same time- in this case there would ne no ‘ new’ debt but the stats would suggest there was.

Certainly as commercial brokers we get a feel for what each lender is able to do and several of the lenders … own staff freely admit to us they are lending very little/ none of through brokers and very hard to get deals agreed. Basically I am not suprised the target was missed but am more suprised by how close they came….

2nd half of the year always used to be stronger for loans so they may well still make their targets by the year end- however- everyone seems to be agreed that small businesses are not getting the credit they need and with all the banking chaos from last week its doubtful that matters wilkl improve much this year targets or not.

Interest rates held for 28th Month

e1commercial — Fri, 08 Jul 2011 07:49:15 +0000

Its amazing to think we have had 0.5% base rate now for over 2 years. Central banks say they like to be boring – and press comments seems to suggest we will not see any change until next year. Despite Euro rates being raised to 1.5% ( up 0.25%- this will not help countries such as Ireland and Portugal/Spain.)

Looking back at 2011 next year I am sure we will think how ‘ lucky’ we have been to have had such low rates for so long. Bit of course that tells only half the story- most savers have been hurt- most borrowers havent benefitted from cheaper rates and personal loans and credit card costs have increased not decreased- base rate has little imact for many.

Commercial lenders remain cuatious and further job losses at Lloyds probably will not make that bank any keener on lending.

Britains Banks miss lending targets

e1commercial — Tue, 24 May 2011 11:36:24 +0000

Banks promised to lend £19bn in the first quarter this year ( in the Merlin Agreement) but only managed £16.8bn; given we are now late May i would be suprised if they both catch up and stay on target for the rest of the year. Pipeline is the key here and we see deals still very hard to get through the banks underwriting process.

Some 3 years on after the credit crunch started we still cannot tell whether a specific case will be agreed or not- obviosuly some are clear yes/no decisions but for many there is a real lack of specifics. This is unforgivable. Worse – I suspect some of the lending claimed is just the repayment of overdrafts and the opening of a new loan which counts as new lending – so I would live to see the figures actual new to bank debt. I sense that would be far lower.

I cannot see how the banks can get back on track- where is any demand coming from? We see lots of enquries/daily/weekly /monthly- the difficulty is matching the clients needs to the lenders appetite. Any credit blemish- for whatever reason knocks millions out of any possibility of modestly priced finance. Any loss over the last 3 years- however so caused- has the same result; The banks will not lend on start ups ( too risks/no track record etc) and no projection led business; eg you will find it hard to get a bank to back a modestly successful busienss- say a restaurant looking to double its covers- too risky- sector under pressure and no desire to take a chance on new business being achieved.

New lenders have come to the market and this helps- but in loan terms- the newer players are minute compared to the big banks.

We need more competition and more appetite from the lenders- why isn’t the FSA granting any new licences ? I think Lenders can make money and don’t need huge balance sheets to do so.

I hope for the best but …i remain inconvinced british business can attract the credit support they need.

New Commercial Lender enters the market

e1commercial — Thu, 07 Apr 2011 13:26:42 +0000

We are pleased to announce that a new commercial lenders commences lending today- offering up to 75% loan to value with a range of repayment options. The lender will accept residential investment property/semi commercial and commercial property as security and can offer interest only options for investment loans only. A range of affordability evidence can be provided to the lender and the lenders stress tests are more generous than some of the current lenders.

In addition the bulk of the lender arrangeemnt fee is debtited to the loan ( unlike many others). The lender also takes into account 100% of the gross rental received on any investment property and do not make a deduction from this for stress tests.

The lender will lend on trading businesses ( eg owner occupied) but not on start ups- the lender is looking for experienced business people/investors.

In all a good addition to the market and one we expect to generate good volumes of business for.

Interest rates remain at 0.5%

e1commercial — Thu, 07 Apr 2011 13:16:40 +0000

No change from the BOE today- the notes of which will be out in c 2 weeks and we can then see how close the voting is re any likely interest rate.

Commercial First sell to WLB

e1commercial — Thu, 10 Mar 2011 17:31:27 +0000

CF have announced that an acquisition of part of CF ‘s infrastructure and staff . We await further details as to what this means re any lending facilities and timescales. Hopefully this is good news and evidence of lenders/investors being willing to look at and invest in the commercial property market.

Bank Interest rate held at 0.5%

e1commercial — Thu, 10 Mar 2011 17:28:34 +0000

Base rate remains at the historcial low of 0.5% again today. This is despite mounting evidence from the published meeting notes from the MPC that there is a shift towards a rate rise and we have seen the ECB being far more aggressive in their statements about more imminent rate rises- against which background the Euro shot up against the Dollar.

There seems to have been more potential borrowers asking about fixed rates – but frequently then decide for variable once they see the price; with 5 year money at say 3% plus margin this is a good rate by historical standards. However with base at 0.5% many still feel they can take a chance. There is certainly an argument for this given there remains lots of bad news to come through the economy/ the banks will not be opening their doors wide openm for some time and Public Sector job losses have only just started. As we have seen though with base at 0.5% and many banks charging far higher cost of funds/ credit card rates in the high teens etc- logic and expectation do not always translate into reality.

Indeed apart from the lucky few with low base rate trackers- a more realistic attitude might be’ if it can go wrong it will’ and thus its worth paying for some protection.

Example of swap rates;( subject to change daily etc)

1 year – 1.19%

2 year 1.90%

3 years 2.34%

5 years 3 %

7 year 3.44%

10 year 3.84%

Anything from 3 years to 10 years has got to look good value based on historical numbers.

Indicative Fixed Rates

e1commercial — Mon, 17 Jan 2011 11:17:05 +0000

We have seen commercial rates quoted as follows;

5 year-cost of 3.14% plus margin
7 years- cost 3.57% plus margin
10 years-3.96% plus margin

These are of course indicative and subject to change daily; however- whilst they demonstrate rates are increasing the rate of increase is slow. Given typical margin expectations from lenders anywhere from 3.5% above cost of funds to 5% above-pay rates c 7- 7.5% not untypical. On an historic basis for fixed rate money this isn’t too bad- it just feels like it when we know base rate is only 0.5% and 1 month Libor not that much more.

Outlook for 2011

e1commercial — Tue, 21 Dec 2010 14:27:46 +0000

What will 2011 bring?

Lenders do seem to be talking about lending again and whilst no one expects a gung ho attitude – there may have been a small thawing from lenders in that they will discuss new business- wheareas until now- no real appetite.

Have you recently tried to place a development loan? Then you will know what we mean.

As ever- we see businesses with clean credit and reasonable acounts being offered reasonable terms; those with poor credit and or miced trading results over the last 3 years will find it hard.
Investors- have some choice- not at great loan to values but the stress tests have not got harder over the last 12 months.

In all- little change expected into the first half of 2011- after – we hope to see a slow change heading towards 2012.
Quality quality- rather than location location.

In all the year has brought few suprises- and notwithstanding the many billions the banks have to pay back for Government support next year we remain of the opinion that the worst is behind us- and that slowly … oh so slowly…things will get better. The banks have hiked up rates/ charged big fees/ are overseeing repayment of facilities and generally spring cleaning their books; they haven’t yet got all the bad lending out but…work is well under way.