Great Year For Commercial Mortgages

By Doherty • June 22nd, 2011
Mortgage Netherlands

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It’s been a difficult couple of years for Small and Medium Business, there’s no denying it. Commercial lending has significantly dried up as banks find the risk of investing in small business too high in the current economic climate. The fall in “Loan to Values” (LTVs) has led to huge media coverage of the banks so-called ‘negative’ lending policies.

Nonetheless, all the more recent reports do point towards the prospect of a prosperous 2011 for small business lending in the UK. Some economists predict that there could be more than an 8% rise in lending to commercial sources by the end of this year.

Consequently, any budding entrepreneurs looking to start up their own business, or those small business owners struggling with their finances, now is the time to shop around for the most competitive commercial mortgage rates.

There will be more money available to borrow for commercial mortgages: Finance News reports that Britain’s biggest banks are believed to be in discussion with the Treasury about disbursing business loans and commercial mortgages in excess of £200 billion in 2011.  The Government wants banks to lend more than they did in 2010 and the Chancellor is keen for there to be firm, verifiable lending commitments to businesses.

It would seem that the Government is actually becoming stricter in regards to their expectations of all the main UK banks. Opposition MP’s have actually called for sanctions to be introduced for banks who fail to meet their commercial lending commitments, “It would be total nonsense unless there are penalties for failure”; it seems Lord Oakeshott, the Lib. Dem. Treasury spokesman, is certainly taking no prisoners.

So, whether there are sanctions for the bank’s failure to meet their business lending commitments or not, it is clear that the Government expects banks to make more commercial mortgages available in 2011.  This could benefit you through a relaxation of underwriting criteria, an increase in the ‘loan to values’ available or improvements in the products offered to make them more appealing.

Encourage the growth of your business as the economy improves: Expanding your business or commercial property portfolio is definitely advisable in the upcoming year. With the factors mentioned above taken into consideration, now is the time to encourage growth in your business. Commercial mortgages in particular are a fantastic way of raising much needed funds to buy machinery, vehicles or the property required to expand your business, and in turn, your businesses income.

Buying a property with a commercial mortgage can provide you with the extra space you need to grow your business, the stability you need for long term planning and the reassurance that you are asset building. You could also benefit from a commercial mortgage’s tax deductibility.

Rates are at a historic low: The Bank of England base rate has been at its lowest ever rate, 0.5% since March 2009. Rises in the rate are expected during 2011 because of inflation fears, but even so economist and experts still expect the rate to remain at historic lows throughout 2011. Naturally this means the perfect window to find great commercial mortgage rates.

Economists stress that the base rate is still at a higher level than it was before the recessions, although what is important to note in this regard is that commercial mortgages and business loans will still benefit from low rates. Also, consider a fixed rate mortgage which fixes your interest rate so it does not fluctuate along with the base rate. This way, should the base rate increase your loan rate will remain unaffected. This will make your monthly repayments predictable and therefore easier to repay hence putting your mind at ease.

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