A report by Link Asset Services has revealed strong confidence levels among property lenders. The report found that 72% of lenders believe they will increase the number of new loans over the next year. Just 2% of lenders expect loan applications to fall.
The confidence among lenders is reflected in the fact that 53% of them are planning to expand the number of their employees.
The greatest risk lenders see to their business is political uncertainty, especially in the commercial property market. Brexit is the obvious concern, as it is not clear how leaving the European Union will affect the property market.
Interest rates are expected to rise in 2018 and this will affect the cost of loans, though it may make little difference to the number of new loans.
Due to regulatory changes that affect commercial lending, it is taking longer to process mortgage applications. It takes on average 53 days to get commercial mortgage funds. This could benefit bridging finance lenders, who can provide short-term funds to complete commercial property purchases until mortgage funds are available.
The head of Real Estate Finance at Link Asset services said:
“The story is one of lenders learning to live with political uncertainty and adapting lending practices accordingly. We look set for an increase in lending activity in 2018, with current political risk not enough to undermine confidence.”
Many lenders are looking to increase their commercial property loans because they predict higher risks in residential lending over the next few years.