The so called “Credit Crunch” in the US sub-prime mortgage markets is likely to affect commercial mortgage rates in the UK. Although no-one knows for certain yet how far and how seriously the recent problems in the mortgage markets are going to reach, there is a consensus that the impact will be felt.
The problem is that the banks are exercising more caution about how they lend money to each other, and avoiding obvious risks such as the sub-prime specialists. A number of UK lenders have already been hit by the credit squeeze and the following are just some examples:
- Victoria Mortgages increased their rates by 2.5% on sub-prime mortgages
- Db Mortgages tightened their criteria for the Light Adverse buy-to-let range
- UX Mortgages withdrew their entire sub-prime mortgage range.
- Northern Rock and Bradford & Bingley saw share prices drop
- West Bromwich Building Society withdrew from its latest residential mortgage securitisation deal.
All this means that this is a particularly bad time to be a new commercial mortgage lender trying to raise funds on the wholesale markets for sub-prime and self-cert mortgages. Welcome 5D Finance and Base Commercial Mortgages, two new entrants to the commercial mortgage sector.
Although both companies are publicly stating that they have plenty of funding in place other established lenders are cautioning that if the situation does not improve there will be price adjustments.