Loan write-offs have plummeted in the commercial property sector as banks have tightened their criteria

Francesca Washtell
Follow Francesca
Increase In Housing Starts At End Of Year Signals Housing Market Recovery
In the 12 months to end-September 2016, £846m worth of loans was written off (Source: Getty)
he number of commercial property loans being written off has plummeted 63 per cent, falling to its lowest level since the credit crunch, according to Bank of England data.

There were £846m worth of write-offs in the sector, down from £2.27bn the previous year, between October 2015 and the end of the third quarter of 2016.

Many banks have tightened their lending criteria to commercial property developers, according to peer-to-peer (P2P) property funding platform Saving Stream.

Read more: Risk of more pain for UK commercial property says Bank of England

Some banks have slashed their lending to property developers, even, at times, when the development has been pre-let to a tenant, while other banks have demanded more collateral from borrowers.

As banks become more risk averse to schemes where the tenants aren’t blue-chip firms or public sector organisations, alternative lenders and P2P platforms could be well-placed to benefit from the market.

Read more: UK commercial property investment dropped off in the first half of 2016

"The risk is that many sensible property investments and developments are not able to get funding from traditional sources," said Liam Brooke, co-founder of Saving Stream.

"A good crop of what are still high quality investment opportunities need funding, and P2P investors are taking on that risk that Basel III has dissuaded banks from getting involved with."

Related articles