Commercial Lending RatesInterest on commercial loans
"However, it is important that those looking for financing for a particular scheme should use an expert brokers who can raise resources from the entire brokerage community to make sure that the right financing is obtained in terms of financing needs and at the best possible cost for that particular need.
For Key Commercial, a downwards trend in commercial loan interest rates can be expected
Key Commercial Financing, a special agent, is recording a downtrend in interest rates for commercial, corporate and real estate financing. Low interest rates are being fueled as the number of commercial creditors on the UK mortgage markets increases further and more creditors are entering the markets. These trends are fueled by continuing investor demands for funds and by investor demands for higher yields on their equity.
Key Commercial Finance's Tony Newham said: "Today's markets are very good for companies, developer and real estate pros to procure resources at very competetive rates. We see lower interest rates in practically all financial services industries, even for uncollateralised corporate lending. "However, it is important that those looking for financing for a particular scheme should use an expert brokers who can obtain resources from the entire brokerage community to make sure that the right financing is obtained in terms of financing needs and at the best possible cost for that particular need.
In addition to new players vieing for commercial positions, Key Commercial sees main streets banking competitors for shares in the commercial markets. There is, for example, one large banking institution that offers financing without set-up charges, a 3-year interest flat of only 4.89% and no prepayment charges - an extraordinary proposition.
Meanwhile, a new entrant has lowered its commercial tariffs across a broad front, from 2.5% per year and a setup charge of only 0.75%. Similar tendencies can be seen in the area of real estate investments. As free LIBOR rates have risen to around 0.7% over three months, the gap between challengers' rates and those of major players has narrowed in favor of challengers.
The reason for this is that several of the challengers retained an artifical LIBOR of 0.75% floors, which over a long time caused a discrepancy of about 0.5% in comparison to other creditors who did not have floors and/or bases as benchmark rates. Consequently, some of the challengers are looking for more and more competition, especially for a pro purchase to rent an investor.
Even short-term real estate financing shows a clear downtrend in interest rates. These types of financing are always much more costly than long run mortgage loans, but Key Commercial has recently obtained offers of 0.75% per months for long run commercial real estate financing, and no exits charges. That is a significant decrease compared to only two or three years ago, when a similar business would have been estimated at 1.25% per months.
Meanwhile, short-term construction financing is possible from around 0.4% per annum. Key also pointed out, however, that the UK Government has said that it may raise key rates in the coming years, which could affect the durability of the downward interest cycle in the longer run.