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Loan breaches double in commercial property market

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New figures reveal that the amount of borrowers in the UK commercial market, in breach of their financial agreements, have more than doubled in the early months of 2009.

De Montfort University, who publish figures on the state of commercial lending annually, found that loan agreements have been breached to the tune of £30bn in the first six months of the year, with £18.6bn reported in the breach of covenants and £11.8bn in default.

But according to the figures, the total amount of commercial lending debt, secured by the UK real estate sector, fell for the first time in recent years from £225.5bn to £224.1bn since the end of 2008.

Lending however remains a problem for commercial investors, with only £7.4bn handed out in the first half of the year compared to £49bn for the total of 2008.

With 12 banks and organisations offering 83% of market lending, Liz Peace, Chief Executive of the British Property Foundation, believes the banks return to commercial lending will be a “slow and long drawn out one”.

“There are clear signs that some banks are getting more interested in commercial property again, no doubt on the basis that values have fallen significantly and good terms can be achieved by lenders willing to lend,” said Ms Peace, who also believes the increase in loan breaches will not represent a huge dilemma to existing lenders.

“While more loans are reported as being in default, it probably remains the case that lenders are willing to leave loans in place if the interest continues to be paid, even if they are in breach of financial covenants.”

Written by Andrew Hodges

December 16, 2009 at 10:39 pm

Posted in Comment, LinkedIn

Tagged with , ,

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