Mortgage lenders are facing a meltdown unless they change their commercial mortgage practices, experts have warned.
According to research carried out by De Montfort University, the lending of money by banks to the commercial property market is heading for a dangerous collapse.
Loan-to-value ratios for mortgages for prime shops and offices are now at their highest level since 1999, despite the fact that commercial property values are thought to have peaked.
William Newsom, the head of valuation at the commercial property consultant, Savills, told the Times: "Values of certain assets will fall. Banks will lose money. There are risks in the market and I do not think proper account is being taken of those risks."
Mr Newsom added: "It is a case of stock selection, some assets will perform well, but others will be a disaster."
Meanwhile, Bill Maxted, co-author of the report, said this should be a time for mortgage lenders to be cautious, "but at a time when lending should be slowing down, it seems to be speeding up".
The report did however point out that the majority of mortgage lending was for well-let investment properties, so although yields may be falling there remains some buoyancy in the commercial mortgage sector.
Experts warn mortgage lenders to change practices
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Experts warn mortgage lenders to change practices
Mon, 23 May 2005
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