The Covid-19 pandemic has triggered a risk-off attitude from lenders, with fewer high loan-to-value deals in the market as economic uncertainty has spread.
The team at AEW said the company’s latest research shows that the loan market has “changed significantly” since the onset of the pandemic some 18 months ago. Since 2019 there have been no loans recorded in the European market with an LTV of more than 80%.
Loan margins for low-risk deals and those below 50% LTV have remained flat, while those for LTVs of between 70% and 79% rose by 150bp to 3.9%. AEW said the findings of its latest research report showed “a logical reaction from lenders in a market with heightened levels of uncertainty and risk”.
Hans Vrensen, managing director and head of research and strategy at AEW, said: “In contrast to pre-Covid trends, since the beginning of the pandemic there has been a lack of very high LTV loans, as well as significantly higher loan margins for the loans with an LTV between 70-79%, which indicates that lenders are continuing their ‘risk-off’ attitude, reducing exposure to higher-risk loans and requiring higher margins.”
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