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LONDON-The low cost of money is bolstering activity in the property lending market. With the key five-year swap rate a third lower than experts had predicted a year ago, property lenders are still competing aggressively for business, according to a new survey from FPDSavills.

And the ready availability of finance is considered by the agents to be responsible for the contradictory nature of the current property investment market: in 2002 investment yields hardened while rental levels fell. This is the first time this has happened in over 20 years according to statistics prepared by IPD, and FPDSavills is predicting more of the same for 2003.

 In the property lending market, there are widespread reports of higher loan to values being granted by lenders. Loans on prime property up to 90% can be sustained based on the low cost of money. But FPDSavills director William Newsom warned: “Lenders should be aware of the risks arising from the occupational and investment markets going in different directions and need to carefully price letting risks in a weak occupational market.”

According to the statistics from De Montfort University, the fundamentals of the property lending market appear to be sound. However, Newsom says: “Given the current stage in the economic cycle, I just wonder whether it is too good to be true.”

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