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European Lending Trends October 2016

Nigel Almond

Head of Data Analytics

Phone +44 203 296 2328

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  • Brexit not impacting willingness to lend in the UK
  • Lending conditions remain positive with originations and refinancing set to expand
  • Majority of lenders remain risk averse with limited appetite for financing speculative development
  • Average LTVs have fallen across the board with margins up. All-in cost stable as swap rates fall

Lending conditions remain positive across Europe with a positive balance of lenders reporting an increase in originations and refinancing in the coming six months. For loan originations 80% of lenders expect activity to be the same or up compared with the last six months. This rises to over 90% for refinancing.

Majority of lenders are providing senior loans. Whole loans and stretch senior are the next most common reflecting the preference in the market for a single loan provider, albeit some lenders will seek to syndicate part of the loan.

We continue to see a risk averse attitude towards some forms of lending. The focus remains on prime and nonprime standing investments in top tier markets. In second tier markets there is an increased appetite to provide development finance on pre-let schemes at the expense of secondary assets. This highlights a focus on better quality assets in lower tier markets. Lending on speculative development remains the preserve of very few lenders.