WHAT’S HAPPENED TO COMMERCIAL MORTGAGE RATES? A REFLECTION BY THE INDEPENDENT MORTGAGE BROKERS AT CHANDLER & CO.
Throughout 2022, we’ve seen strong demand from care home buyers and investors continue unabated with a surge in retirement properties coming to the marketplace, from family businesses seeking an exit to multi-site providers seeking to exit from older, converted property and invest in newer or new builds subject to increasing complexities of an ageing population.
What just happened pre and post mini-budget and how did this affect mortgage rates?
Before the mini-budget in September 2022, commercial mortgage rates started to price in increasing margins with an impact on lender timelines and debt affordability on a care home business, with due diligence from buyers and lenders addressing post pandemic impact, in particular resident occupancy and insurance together with the increased cost of staffing, the cost-of-living challenges, including the cost of energy.
Post mini-budget, some mortgage rates were put on hold whilst a repricing to reflect current and future market conditions were considered in light of a more volatile market. However, set against this, lenders in care home provisioning tended to stress test as normal as part of the future proofing of debt servicing, with loan to values being addressed accordingly to reflect lending risk appetite.
Bank of England
Now that most measures in the mini-budget have U-turned with the markets reacting favourably on the whole, the Bank of England will assess all market variations when they meet to discuss a potential further base rate rise in November.
Typically, the wide lending market which care home brokers reach out to, have been stress testing with an increased margin for some time, with lenders assessing the market impact on fixed and variable loans, the potential impact of a fixed term period in some cases, or the adjusting of the amortisation period.
As independent care home and wider care sector brokers, the team at Chandler & Co. continue to speak with the wide lending market, obtaining the real time impact of factors affecting the mortgage climate, whilst obtaining the latest pricing terms from lenders.
After a slight pause, tending to exclude mortgages that were close to draw down, the Chandler&Co brokers are finding that pricing communications for care home lending has restarted, with indicative terms looking at variable and fixed illustrations. It is still the case that if you’ve been turned down by one mortgage lender, the wider care home lender continues to offer solutions.
The 31 October 2022
Remains as the date for the Government to announce a detailed fiscal plan, and in it to confirm how they intend to fund the package, with the U-turn on the mini-budget providing some answers to this question. The U-turn of some of the mini-budget measures indeed appears to have brought some stability to the financial markets and the wider care home lending market reflecting rate increases in pricing strategies.
What has happened pre and post mini-budget had to some extent been priced in to commercial mortgage deals since it has been well documented that the economy is in a period of inflationary measures and rising interest rates.
No-one knows for sure what is ahead but keeping in contact with your care home mortgage broker supports real time planning whether its for your first care home acquisition or a further site for your growing care home business.
If you are thinking of purchasing your first or next care home or your mortgage term is approaching maturity speak to the mortgage experts at Chandler & Co, here are some typical questions that the brokers are addressing currently:
- How certain are indicative mortgage terms compared with actual draw down terms?
- The lender(s) illustrations have quoted a fixed rate plus margin, how does this impact completion upon draw down of the mortgage?
- Are care home mortgage rates rising faster now?
- How might increasing interest rates affect my commercial mortgage?
- Have lenders increased their stress testing when looking at debt serviceability?
- What are my options for a fixed-rate mortgage deal when purchasing or extending a care home?
- I’m on a fixed rate, what are my options when my mortgage deal ends?
Speak to the care home mortgage experts at Chandler & Co to address your current and future lending requirements, the brokers will support you through the entire lending process whether it’s to purchase a care home, extend your current care home or support you with releasing cash for a refurbishment plan.
The care sector experts will support you through your specific circumstances to help determine the best lender for you and your care home, assisting you along the journey with the entire lending application.
Care Sector Finance Brokers and care home specialists
Telephone 01622 817484