The Credit Crunch – one year on.


It seems like a while since we first heard about the credit crunch but it was certainly surprising to hear that it’s apparently one year since it started.

For some interesting analysis of how it all started and where it’s all likely to go, you can have a look at the FT’s take on the whole thing HERE;

As a broker, we have certainly seen a tightening of terms over the past year and deals that were agreed in the autumn of last year will probably be the best agreed for many years to come.

We are now seeing Banks re-pricing entire debt facilities of clients when they come back for further advances which is necessitating refinancing packages and there are limited numbers of Banks now lending over Base Rate (as opposed to facilities linked to LIBOR – trading today at 5.76%).

Additionally, the loan to value levels of Banks are being pared back to represent their perceived risk and there needs to be some element of strength within deals to make them attractive to the remaining lenders in the market. Bank’s fees are going up and we are also seeing increasingly desperate tactics by Banks to win business as relationship managers look over their shoulder at mass redundancies.

It’s not all doom and gloom though, there are certainly still Banks around lending to the commercial markets and many of these are lending still up to around 80% loan to value, with aggressive margins over Base Rate.

From a brokers perspective, it’s an interesting time. Clients are coming to us with problems that their own Bankers, who promised much in the last 5-years can now no longer deliver.

David Burrows