Lenders' risk appetite falling, says adviser
It’s the most difficult time for New Zealanders to obtain commercial funds in eight years, according to one Canterbury mortgage adviser.
Loan Market Paramount managing director and chief adviser Nathan Miglani (pictured above) said lenders’ risk appetite was decreasing and their access to available funds was drying up.
“This time 12 months ago we would have had about 35 developments on the go that we were organising finance for clients. However, fast forward to now and all lenders are offering is capitalised interest,” Miglani said. “There is now added pressure for clients to obtain approval for their finance and applications are taking longer to approve because the market is so tight.”
Miglani said the banks’ appetite was decreasing because there was too much risk involved when it came to lending.
“They are saying we can give you the money to fund the land component, but they are not comfortable to lend on the finance development side of things,” he said. “The commercial lending space has changed so quickly.”
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Miglani said commercial finance was performing stronger in urban areas such as Christchurch, but not as well in rural or regional areas.
“Banks are now saying they are not keen to lend in particular areas, whereas 12 months ago this would not have been an issue and a client would have been approved for finance straight away,” he said.
Miglani said commercial interest rates continued to rise, and he believed this would go on throughout the rest of the year.
“I am predicting they will creep higher until December this year and hopefully we will see some light at the end of the tunnel in February or March next year,” he said. “With finance experts anticipating a recession in NZ, many developers have a scary prospect ahead, especially those who are not experienced in projects in different markets.”
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Miglani said mortgage advisers should have at least 20 lenders on their panel at one time.
“Lenders’ funding levels are constantly changing, so keep all lines of communication open with each lender,” he said. “Make sure you explore different solutions and ensure you are locking in the best deal for your clients, so they are not getting ripped off.”
Miglani said client applications for commercial finance were vast as some lenders might have money to lend one day but not the next.
“My advice to fellow mortgage advisers is get your head around different lenders’ policies, because when it comes to commercial lending there are no set policies,” he said. “If your client doesn’t have a job but can prove they have an exit strategy with their loan, chances are they can still get lending. Also educate your client up front, especially as all lenders have different policies.”
