The bank margin for the standard case has risen a further 14 basis points to 266 bps, the highest level we have ever measured. Since the requirement for equity has increased considerably, this means that the standard case – where we assume 65 per cent loan-to-value – is not particularly relevant in today’s market. In practice, virtually no loans with 65 per cent LTV are being given today. As readers will be aware, loan tenors have also shortened significantly in recent years.

If we assume 50 per cent LTV and a three-year tenor, the margin is 215 bps – in other words, significantly below the standard case. But the increase in the margin over recent quarters is almost as high. 

The five-year swap rate has declined by 16 bps – in other words, by almost as much as the bank margin has risen. This means that the overall borrowing rate for new five-year loans with a full fixed interest rate has stabilised at around six per cent. Since virtually all loans have shorter tenors and lower LTVs, however, many players are in practice securing financing down towards 5.5 per cent.