5 year fixed rates are coming out at c 2.82 % cost of funds- add your margin to obtain the pay rate; so with new loan being quoted from 2.75% t0 5.2% above base a new 5 yerar fixed deal coudl cost up to 8% little wonder many small businesses chose to take a chance and take flaoting rates currently.

10 year money is priced at 3.72% – historically very low and a good time to lock in; but again the margins lenders are seeking means borrowing cost little different to what it was before the financial crisis.

Have businesses benefitted from the low interest rate regime>? yes- if they had base rate linked debt before the crisis and dont need to refinance currently; otherwise not really…

Barclays seem to be active currently saying they are open for commercial mortgages ( owner occupied not investment ) . They were at Mortgage Expo and are busy making calls to brokers currently hunting for business. Our perception is that they are not really lending- certainly cases we have tried with have come across all sorts of unexpected questions and concerns. If our brokers have any feedback here would be interested to hear.

What can we make of todays announcement that Beacon will stop  new lending as from 27/11? After Platform left easrlier this month it means two of the last self cert lenders have closed the doors- is this FSA pressure or investors pulling out; Frankly there will be strong demand for such products and one assumes therefore good margins and incomes to be had for the investor/lenders; real or potential bad debts have probably killed them off.

Some reports have suggested today residential house values have risen for the 6th month and others have said prices have dropped 0.5% in the last month alone. What do we believe?

Fewer houses are being repossesed than was expected – down by c 25% ; Broker only residential mortgages are increasing and 1 in 3 new mortgages are broker only- which helps keep brokers in business and of course reduces lender costs significantly as the broker does most of the work and carried a lot of the risk if the case falls over- eg big investment in time thats not recovered.

I have just returned from Expo at Olympia 2;  First thing there were more exhibitors than visitors. As lunchtime arrived the hall did at least have a buzz about it and seemed quite busy- no doubt enhanced by the small location.

Visitors seemed keen to find new income streams but resigned to a lack of choice with lenders and in reality the show how far the sector has fallen from 2 years ago. Optimism over experience seems the watchword.

HSBC and Barclays announced results yesterday that suggested the credit crunch may hve peaked and that next year will be better.

Both banks of course escaped Government support last year although Hsbc to our view are not lending this year and Barclays are very selective. So what is happening?  Barclays made £1.56 bn in threee months – giving profit for the last 9 months ar £4.5bn; not bad  ! Hsbc merely said profits were significantly ahead of same time last year.

Barclays however are increasing provision by 65% quarter on quarter.  And thats the worry – despite profits and good demand for commercial loans- the Bank are hoarding capital to offset future bad debts and not keen on outting out new loans.

At some point one would hope they need to attract new loans for the fee income/long term interest margin and additional income streams such as transmission costs ( what we pay for cheques and credits. credit card machines etc)- and if they dont  agree loand now Q1 2010 will remain flat. Unfortunately thats where it is……no change expected and we expect bank lending on commercial to be slow all next year.

Privately bankers tell us the same thing- off the record.

In other news Northern Foods confirmed it was spending £26m in investing in new robots and sacking 300 employees. Luckily robots cannot take the role of commercial brokers just yet- though having a metal skin rather than just a thick one might come in handy for the next few months.

The BOE announced that base rates will remain at 0.5% today – a move widely expected.

They have also announved a further £25bn QE money to be used ove the next three motnhs to help stimulate the economy.

Whether it will result in any easier access to finance remains to be seen….remember also that vat goes back up on 1st Jan 09 and none of the lenders we talk to excpect to have any larger targets next year or that credit will be any easier. if anything the mood amongst lenders remain downbeat.

We have been finding some cases difficult to place currently; one involves a refinance to high street lenders from a non high street higher rate loan company. The latter lent on a new business a year ago when other lenders would not have helped and we hoped that we could position the deal into something supportable now.

Despite clear ‘ income and expenditure forms showing what costs have been in 2009 and what they would be with a new lender in 2010 and large savings lenders have declined to assist;

1; they would not have lent on the original deal and as such didn’t see why they should help out now
2; didn’t want to take a loan off another lender
3; acknowledged savings would be made and that client had met all his loan liabilities perfectly – but still didnt want to take a ‘ risk’.

Even a clean history and clear evidence they would be far better off makes no difference…

With the recession not ending officially as expected last week speculation is growing that the BOE will announce further QE- with estimates of c £30BN more being discussed.

Does the economy need it ? We probably will not know until any new money has been spent -but E1 remains frustrated that the original money spent we thought and hoped- would help encourage the banks to lend; naive we know.

Until the banks are more forthcoming small businesses will not feel comfortable and be willing to invest/take on staff/ undertake marketing etc.

Interestingly though – undertaking a very unscientific snapshop of family/close friends and colleagues family activities over the school half term suggests that Centreparcs in Nottingham /York city centre /Peterborough shopping  centre /Ilford shopping centre/ Stratford shopping centre and various other places- that there is no sign of recession at all and ‘ you would think they were giving it away ‘ comments and thats depsite it being end October and petrol prices being high; stores may be discounting to get people buying but are the shops ‘Crying Woolf ‘  again too soon ?

Press comment at the weekend suggested RBS would receive a further 319bn tax payers money taking their stake to 84%- as part of the toxic asset scheme restructuring.

RBS was already expecting to have to sell off various of its companies by as much as 40% of its current size- this will provide a major opportunity for potential competors with funds to acquire assets such as Churchill and Direct Line.

According to official figures released today- the UK remains in recession with a suprise 0.4% reduction in GDP; some commentators had expected the UK to show positive figures.

This is the worst run of data since 1955 when figures were collated- unless the figures are revised later.

Even if the figures had been better-  as Philip Green implied recently…we may not be in a recession but with so many unemployed … what is recession; what is normal ?

Certainly from our perspective until the lenders become more supportive and show greater appetite/even margin increases in LTVS- confidence and jobs will remain at risk.  We are clearly not getting very far very quickly despite huge investments by the Government with QE.