Brokers

Traditionally, commercial mortgage brokers were few and far between and did not get paid for their introductions to the Commercial Banks. The Mortgage Broker charged a fee that ranged from 0.5% to 3% of the mortgage draw down. Today, despite commercial mortgage companies now offering introducer fees to mortgage brokers, old time commercial mortgage brokers are still charging fees above a modest amount. It is wise to use a commercial mortgage company that does not charge you a broker fee.

Royal Bank of Scotland and Abbey have challenged the traditional commercial banks and offered lower interest rate margins and improved credit policies to cater for a wider range of commercial borrowers. The role of the Mortgage Adviser has advanced to become an effective way to place your commercial business, in fact, Banks have employed Business Development and Relationship managers to oversee the broker, bank relationship and ensure that the service delivered remains superior.

Whilst the market has moved fast the commercial mortgage market is set to take a sharp turn. That is to say a sharp turn directly upward at rocket speed. Specialist Buy To Let mortgage lenders are setting plans to enter this relatively unchallenged market.

Specialist Buy To Let Mortgage Companies, backed by Buy To Let Mortgage brokers such as Landlord Mortgages, will be able to deliver higher loan to values, lower interest rates and faster deals. What’s more you will see more self-certification commercial mortgages, flexible mortgages, current account mortgages and offset mortgages. Deals with no redemption penalties or early repayment charges will allow regular drawdowns and overpayments.

A Quick Response

It has been researched that commercial mortgage brokers consider speed the most important factor when choosing a lender. The survey showed 91.3% of brokers rated this as important and 87.6% considered price important. Other factors that were high scoring were risk appetite at 72.6%, having a relationship already with a lender 68% and 50% thought commission the number one factor.

If lenders wish to deal with brokers this is the area they must address. Getting the deal was more important than the price of the loan.

Others felt that this was not necessarily true as what was the point of a lender offering only 65% but giving this in ten minutes. As brokers often negotiate down their fee to get a deal the fact few thought commission important was not surprising.

Commercial Property – greater returns

Commercial property is expected to give a higher return than equities this year.

It is considered that rental values may rise by 1% to 4% this year whilst UK economic growth will be less than 3%.

It is the first time that office rents have been greater than the IPD average since 2001 and West End and City of London are strong areas whereas provincial commercial property have only had a slow rental growth.

The High Street and Shopping centres retail property is strong with rising retail sales despite the lack of a soft landing from balance sheets.

Commercial Property

What many investors want to know is, has the market for commercial property reached a flatline and if not will the present trend of strong growth continue.

Money costs more and yields have only risen slightly. In the past three years borrowing costs have risen from 3.5% in July 2003 to 5% in 2007.

There is talk of not if but when will the crash happen, so far there are no immanent signs of this occurring. If it was to crash it is likely that it would be a gradual slowing of values. With the good rental growth now being seen in central London, commercial property will continue to perform better than the rest of the market with a probable rise into double figure rental growth over the next two or so years.

The supply of property in London is getting tighter and speculative building is now taking over. It is of course when this goes too far that over supply becomes the problem. It is usually a sign that the market is going to fall flat. As long as demand meets supply this will mean that the large amount of speculative building likely to come onto the market in 2007/08 will do well.

The traditional type of investment is now expanding into hotels with some investors adding several to their portfolios.

Of course when investing in commercial property it should be thoroughly researched and risk factors assessed. Like all property investments commercial property is led by supply and demand.