Home
Company Profile

Commercial Mortgages Why Use Us Client Testimonials Recent Deal List Market Commentary Contact

Market Commentary

WARNING: LIBOR linked deals

I recently wrote about the pitfalls of having a LIBOR linked deal in the current markets and this has proved accurate with last week’s AIG and Lehman Brothers trouble and the significant changes we saw to a number of institutions and the way they operate. It’s fair to say that the face of the markets has changed considerably, especially when played out against the backdrop of the more general doom and gloom that seems never ending.

Whilst a LIBOR linked deal will be inevitable for some larger operators, the 3-month LIBOR rate, the rate that a lot of the commercial lenders are using as their default rate currently, sits as of this morning at 6.28%. Given the current lack of trust between Banks currently, this volatility in the difference between Base Rate and 3-month LIBOR looks like it is going to be with us for a while to come.

It surely can’t be long before the majority of the commercial lenders in our sector start to lend on LIBOR but for the time being, there are still lenders out there prepared to lend on Base Rate and this gives an immediate significant saving, even if those Base Rate facilities are being priced with heavier margins to reflect their stability.

The current wider market difficulties are also affecting the lender’s appetite for risk. We are starting to see some a slight paring back of loan to values from the lender but for the right deal, we still have sources that can reach 80% loan to value but a more likely scenario in current markets is 75%.

In these difficult times, a broker is always more useful and it’s got to be worth getting a second opinion on the options that your current lender comes back to you with, especially if you they are LIBOR linked or not as aggressive as in the good times.

David Burrows - London
View David's Profile

Site Map | Contact | Copyright 2006 © D.S.Partners - Design by Pin-up

David Stephen Partners is an appointed representative of Sesame Ltd, which is authorised and regulated by the Financial Services Authority.Sesame Ltd is entered on the FSA register (www.fsa.gov.uk/register/)under reference 150427. The Guidance and/or advice contained within this website is subject to the UK regulatory regime and is therefore targeted at consumers based in the UK.