A survey published by De Montfort University found that 21% of respondents representing 47% of outstanding commercial mortgage debt intend to to securitize loans once the CMBS market recovers.
According to the survey, loan terms have become very attractive for lenders. The average loan margins for prime offices are at 222 basis points, upfront fees at 95 basis points, LTV at 66% and Issuer Credit Rating at 1.37.
These have the most favorable terms for lenders and hence the least advantageous to borrowers since the start of the survey in 1999. This is mostly due to the lack of competition for new lending as only 23% of respondents are looking to expand their loan origination in 2009.
The main reason given why most lenders are not looking to grow their lending is that they are having issues with their existing loan book.
The survey showed that 89% of lenders reported that they held loans that were in breach of their financial covenants, representing 6.5% (or ₤15 billion or $24.57) of their book. This is almost double the year-end 2007 breaches.
Respondents' loan defaults increased almost four-fold from year-end 2007 to ₤ 3.2 billion or 2.6% for the reporting lenders. If applied to the entire sector, the 2.6% would result in ₤6 billion of defaulted loans.
The recovery statistics from the survey remain sketchy, said Barclays Capital analysts.