Insurance News Archive

Commercial property lending at record levels

Lending on commercial property in the UK now stands at record levels after it jumped by a fifth in 2006, according to new figures.

A report by De Montfort Univeristy in Leicester brought together information from 60 banks to find that lending on commercial property grew to £85.7 billion - up from £64 billion in 2005.

The study highlighted a number of trends suggesting that banks are taking more risks on commercial property investment.

New commercial developments were being supported to the tune of £16 billion, with £6 billion being speculative as they do not yet have confirmed tenants.

This contrasts with a complete absence of loans for such schemes in 2000.

But Bill Maxted, the author of the report told the Financial Times that the £6 billion was still a small fraction of all outstanding loans held by banks in Britain and did not present much risk.

Due to this continued confidence in the market, nine out of ten banks to further increase their exposure to the market this year, according to the report, with many covering the risk by turning them into bonds which can be sold on to investors.

25 May 2007