2011 – the year the Banks will start lending again?

There may some good news for property according to a report by the Property Lending Forum, who released a ‘lending intention survey’ last week.

They spoke to the 20 most active Banks and have concluded:

* The Banks have a cash mountain of £18-21bn to lend in 2011
* That is nearly 50% more than in 2010
* 80% of those surveyed want to increase their lending
* 30% of those surveyed would have lent against secondary deals in 2010
* 70% will lend on secondary deals.

So that’s all of the good news then – and the recession is over – back to boom times?

Not quite.

Did you notice that the Banks would have lent in 2010 on secondary deals. They didn’t. Why? Well, firstly, people stopped asking them! Fear of refusal was a real issue – for some time it has not been worth asking the Banks for cash. We have got out of the habit. And then there was the issue of terms available – which anecdotally were hardly ‘generous’.

The ‘survey’ results seem to miss out some key points. The cost of money is a factor. In order to make it sound like a black art the Banks tell you that money needs to be bought at a margin of between 200 and 250 basis points. To you and me that’s 2.00% – 2.50% margin. Then there is a statement that ‘Banks are refining their client list’ – so you need to be a pretty safe bet! There’s also no mention of the loan to value ratio either. It is probably between 50-65% at the moment – so you need quite a lot of equity to get into the funded market.

All in all this ‘news’ is a start, but it’s not going to kick-start a lack-lustre market. And the headline might be a little bit ambitious?