2023 looks to be a mix of low margins for very low gearing or expensive money at modest gearing. Base rate increasing by 14x in 1 year hasn’t helped.

As senior debt lenders continue to reduce their LTVs the gap between debt and equity will widen. In January revised capital cost assumptions and new regulatory pressures will result in prime lenders having to offer gearing in the 35% to 50% LTV range. Prime interest margins remain attractive in the 1.75% to 2.50% range with the recent problem now being either the floating, or fixed, cost of capital. 3- and 5-year caps can be good value but perhaps not if thinking about holding an asset in the medium to long term as the 10-year gilt rate is 3.60% and variable Bank of England Base Rate is at 3.50%. Lenders offering margins in the 3.50% to 5.00% range are likely to be in the <65% ltv space if the deal can hold up to pessimistic assumptions.

If your debt lender is offering you a lower LTV than you would like then we can help.