The reduction in the UK’s debt pile slowed to just 2.5% in the first half as origination caught up with deleveraging.
The 2.5% – or £13.8bn – fall in outstanding balance sheet debt reflects a “stabilising” market definitively captured in the 15th De Montfort University UK Commercial Property Lending Market mid-year report, published this week.
It compares with a far larger drop of 4.3% during the six months to June last year.
It indicates that this year’s annual reduction will fall far short of recent years when up to 9.9% was wiped off as banks concentrated on cleansing existing loan books.
Bill Maxted, who surveyed 81 lenders to compile the mid-year report with Trudi Porter, said: “Overall, our feeling is that the market has stabilised. Legacy positions are slowly being eroded and there is more competition in the market.”
Loan originations of £13.3bn were recorded, up from £11.3bn at the same time last year. But the number of active lenders shrank from 60 to 45 as a severe lack of stock hampered lending intentions.
Germans were the only category of traditional lending organisation to increase their share of the new lending, going from 16% at year-end to 23% at midyear, while UK banks and building societies were squeezed by 2% to 46%.
Activity by insurance companies and other non-bank lenders was also down by 2%, as insurers fell out of the top 12 active lenders completely.
Including loan extensions, gross lending swelled to £18bn – again significantly up on the £15.4bn recorded in the first two quarters of last year.
Increased competition pushed lenders up the risk curve in terms of project type and loan-to-value ratios, at the same time as forcing margins down.
However, Maxted said that not all sectors were benefiting from the uptick in lending, with secondary retail suffering particularly because of a surplus of space.
He added that for many lenders the market remained “tough, busy and not very productive”.