Assetz Capital slashes mortgage rates even as critics warn about credit bubble

Fast growing SME focused peer to peer lender Assetz has stepped up the pressure on its competitors by announcing lower interest rates for its commerci

al mortgage product. But this reduction in rates comes as more and more City commentators warn of a credit bubble – and the need to raise rates.

Assetz Capital has lowered its entry interest rate for commercial mortgages from 7.9% to 6.9% – the North West based lender reckons that this new rate “is one of the lowest rates available from any alternative finance providers”.

The lender says it has identified many “credit-worthy small and mid-sized businesses throughout the UK that are looking for faster acceptance times to resolve their borrowing requirement and greater flexibility around the loan structure and repayment profile. These borrowers are sometimes unable to meet every item of a traditional bank’s stringent checklist for a commercial loan or can ill afford their lengthy acceptance and processing times.”

Crucial to its business model is fast turnaround times for lending decisions – the lender argues that most SME owners are time poor and that many are put off by protracted decision making processes at the major high street lenders. Assetz argues that it can in principle make a decision on a loan in just one day.

 Stuart Law, CEO of Assetz Capital said: “With a market-leading nationwide network of professional Relationship Directors across the UK, we’re in a great position to meet borrowers and their brokers face to face to identify the best options available and to potentially offer a decision in principle in just one day. We continue to delight brokers and their borrowers with our highly experienced but pragmatic approach to lending and this new lower interest rate is another milestone for the peer-to-peer industry and for Assetz Capital.”

This lowering of interest rates is certainly a bold move for the platform – and evidence that Assetz is stepping up its move into the mainstream by working with finance brokers.

Yet many in the City are now suggesting that after years of low interest rates and ample quantitative easing, the time has now come for INCREASED interest rates. Only today for instance Mark Carney suggested that the next move by the Bank of England will probably be an increase in rates in November.

This change in attitude by central bankers towards rates is long overdue according to many City analysts. Macro strategist Albert Edwards of French bank Societe Generale, for instance, only last week in a research paper called for a rethink of monetary policy. According to Edwards “we are in a QE, zero interest rate world, where central banks are effectively force-feeding debt down borrowers' throats. They did it in 2003-2007 and they are doing it again. Most of the liquidity merely swirls around financial markets, but there is certainly compelling evidence now of a consumer credit bubble in both the UK and US (as well as a corporate credit bubble in the US).”

The notoriously bearish commentator argued that monetary policy is “way too loose in the UK as well as in the US, and let us not forget the BoE cut rates in the immediate aftermath of last July's Brexit vote. Bubbles are appearing in areas like consumer credit because interest rates are far too low and need to be raised.”

Given this choppy macro rates backdrop, this move on commercial mortgage rates by Assetz could be seen by some as brave, especially as many in the commercial property market believe that the current (bullish) cycle is likely to turn imminently, with declining property prices. On the other hand, Assetz is likely to reserve this new attractive headline rate only for its most reliable, lowest risk customers – it’ll also be hoping that its more personalised risk analysis will also help minimise any losses if a credit bubble is forming.