Bad commercial property loans hit lowest level since credit crunch

– £846mn written off last year compared to £2.27bn in previous year

– Fall in bank lending providing better opportunities for P2P lenders

The value of bad bank loans to the commercial property sector has fallen to its lowest level since the credit crunch, with £846mn of write-offs in 2015/16*, down 63% from £2.27bn the previous year, says Saving Stream, the peer-to-peer propertyfunding platform

Saving Stream says that the figures suggest that lending to the commercial property sector has continued to become less risky as banks demand more collateral from borrowers in the shape of lower LTVs (loan-to-value).

Many high street and some challenger banks have also slashed their lending to property developers, even in cases where the development has been pre-let to a tenant.

Saving Stream says that whilst the fall in bad commercial property loans is good news, the tightening up of lending criteria by the banks may now have gone too far.

Liam Brooke, Co-Founder of Saving Stream, says: “The risk is that many sensible property investments and developments are not able to get funding from traditional sources.

“Feedback that we are getting from our customers is decision on funding from some banks has slowed to a crawl.”

Saving Stream adds that banks have also become increasingly risk adverse over lending to fund investment in commercialproperty where the tenant is not a public sector organisation or a ‘blue chip’ business.

It says that this reduction in lending is resulting in a growing funding gap for high quality investments and development schemes which don’t meet banks’ increasingly stringent criteria.

This is creating more opportunities for alternative lenders such as peer-to-peer (P2P) platforms to step in, enabling propertyinvestors and developers to invest in new asset purchases and projects and providing P2P investors with higher-margin loan opportunities.

Says Liam Brooke: “A good crop of what are still high quality investment opportunities need funding, and P2P investors are taking on that risk that Basel III has dissuaded banks from getting involved with.”

“With bricks and mortar continuing to be a popular investment choice for individuals, P2P models such as ours which provide an accessible way to match this strong supply and demand are gaining real traction.”

Saving Stream’s model provides property finance and development loans secured against the value of the property at a maximum 70% loan-to-value, minimising investment risk. Investors have the potential to earn up to 12% interest per year through Saving Stream’s innovative P2P platform.

Value of bank loan write-offs to commercial property sector falls 63% in a year to pre-credit crunch low

*Year to end September 2016 – latest data available.

Source: Bank of England- Lending by banks and building societies 

About Saving Stream

Saving Stream is Europe’s largest P2P secured lender, providing property finance and development loans. Since it was founded in 2012, it has provided an annual return of up to 12% to its investors. Over 12,000 registered users have earned a total of £17.3 million through Saving Stream, and more than £220 million of funds has been provided for propertyinvestments.

All loans made through Saving Stream’s platform are secured by legal charge over UK property and loan amounts never exceed 70% of the properties’ Open Market Valuations undertaken by independent valuers; however, your capital is at risk should a borrower default. Funds lent through a peer-to-peer website are not covered by the Financial Services Compensation Scheme (FSCS), although Saving Stream maintains a substantial discretionary provision fund to assist in making up any recovery shortfalls.

Whilst no Saving Stream investor has been subject to any loss of capital, past performance is not a guarantee of future performance. Please obtain independent advice if you are in any doubt as to whether this platform is suitable for you or if you require tax advice. Please see our full risk assessment. Unallocated investor funds are held in a segregated client money bank account.

Saving Stream is a trading name of Lendy Ltd, a company registered in England and Wales under number 8244913 with its registered office and principal place of business at Brankesmere House, Queens Crescent, Southsea PO5 3HT. Lendy Ltd is authorised and regulated by the Financial Conduct Authority (FCA), number 654326, and is registered with the Information Commissioner’s Office (ICO), number Z3404040.’

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