Lender Re-values Business Loans
Since the start of the credit crunch and economic slow down, the price of an average property in the UK has seen a considerable drop in value, increasing the loan to value ration on the mortgage or homeowner loan and in some cases, placing the homeowner in a negative equity situation.
Whilst those of us with a loan secured on our residential property may feel hard done by, spare a thought for people and businesses who have loans on commercial properties, the value of which has been hit even harder than the housing market. As a result of this, one lender has carried out new valuations on existing commercial loan properties on its books, in order to re assess the loan to value ratios on its business lending.
Norwich & Peterborough has carried out the valuations on business loans to ensure that its existing commercial loan book still meets the society’s lending criteria with regard to maximum loan to value.
Due to the drop in commercial property values, some loan customers have been asked to provide additional security for their loan, or to repay some of the outstanding loan balance in order to bring it back within accepted loan to value limits. N&P have said that this only affects very few borrowers, however one customer, who’s property had dropped in value from £650,000 to £450,000, was asked to either repay a lump sum or face a rate increase of 2 per cent, due to the loan to value on the property increasing from 80 per cent originally, to 108 per cent.
N&P have said that the reason for its actions is to protect its savings customers, who’s money has been used to back these commercial loans. An increased loan to value, increases the risk associated with the loan and the interest rate is therefore being increased to account for this additional risk, the alternative course of action is for the borrower to repay part of the loan, or provide additional security.
