Guy Garrard, head of business development at Tiuta, looks at the commercial mortgage market
It’s official. By the skin of its teeth, the UK has finally exited recession. So with that in mind is it now time to put out the bunting and herald the dawn of a new era for SMEs within these great and fertile shores? Not exactly.
Recent data from the Office of National Statistics suggests that the economy has only grown by a weaker-than-expected 0.1% in the last three months of 2009. Compared that to neighbours Germany and France and it seems the UK has been a bit slow out of the recessionary blocks. Well, more than six months slower to be fair and we have also lagged well behind the US and Japan in the official burning of the recession bra. But let’s be thankful for small mercies. The economy had previously contracted for six consecutive quarters – the longest period since quarterly figures were first recorded in 1955 – but in addition to this small growth there have been other signs of recovery including unemployment falling for the first time in 18 months.
However, upon the announcement of this good news many experts appeared a little shocked at the mere 0.1% rise with the majority expecting a far bigger jump of 0.4%. It should be pointed out that this growth figure is the first estimate of output between October and December and there is a possibility that is could be revised downwards. Whether this means it could be the shortest recession recovery on record is unsure but let’s hope these fragile figures remain positive for the sake of all our businesses everywhere.
When aligning this announcement with the commercial market it’s difficult to see an immediate impact but any extra confidence that can be instilled should be taken as a positive. It’s no secret that the commercial mortgage sector has been hit hard by the credit crunch and resultant funding concerns but there is reason for guarded optimism that this is a market that is beginning to turn the corner.
In terms of the wider commercial arena Barclays has just announced a further £88 million is available to lend to SMEs through the Enterprise Finance Guarantee (EFG), which was introduced during the downturn to help more businesses get finance. The scheme enables Barclays to lend to viable businesses that, because they cannot offer sufficient security to meet normal commercial lending, would not otherwise be able to get the finance for their business to survive and grow.
Focusing on the intermediary market, Savills Lending Solutions has launched a commercial debt division for intermediaries looking to place commercial enquiries. Crystal Mortgages has also launched a 100% commercial mortgage product designed purely for the medical sector. Whilst both of these announcements may not be groundbreaking in their own right, any activity is good activity within the commercial arena. The commercial market has come under increased scrutiny during the credit crunch and resultant recession. 2009 saw lenders continue to look at the market with a degree of trepidation. This trepidation combined with funding issues and restricted criteria resulted in very modest improvements within the sector. However, on the back of the end of the recession as we know it and some pick up in the mainstream market in terms of funding, rising LTV levels rising and softening criteria it will be interesting to see if any of these factors have a knock on effect on the commercial sector.
There is always opportunity within the specialist markets if the timing is right and funding is in place. I’m sure there are a number of players, both large and small, keeping a close eye on the commercial market and it wouldn’t be a surprise to see a couple dip their toes in the water over the course of 2010 as lending appetites improve.
I can’t foresee any immediate wholesale changes happening in the market but there are enough indicators to encourage brokers to be looking closer at identifying the needs of their clients both in terms of their business and personal requirements. After all staying one step ahead of the game is an absolute must amidst current market conditions.