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As housing prices and building values continue to plummet, the commercial mortgage market is still sliding downward. Although experts had hoped that the property value drop would not affect commercial mortgage holders, it does appear to be affecting many different sectors. The only commercial mortgage holders that are hanging on right now appear to be those with rental properties.

A statement from HBOS stated in part, “We expect the UK economy to slow further in 2008, with a modest rise in unemployment and low interest rates, accepting that inflationary pressures will restrict the monetary policy committee’s ability to reduce interest rates to below current levels. We expect house prices to fall by up to 9% in 2008.

“As previously indicated, asset growth is slowing and the rate of deposit growth is targeted to outstrip that for assets in 2008. We are achieving substantially better pricing on new lending in our key markets and, as a result, the decline in the net interest margin in 2007 is expected to moderate in 2008. We anticipate relatively stable and potentially improving margins in 2009.”

Related reading: Commercial Mortgages