Secondary lenders vital for market

Secondary lenders will play an increasingly important role in the South African commercial property market, it is has been suggested.

Chief executive officer of Paragon Lending Solutions Gary Palmer told All Africa that this area of the financial services industry is vital for commercial property investors who need to raise finance against assets.

He explained many of the country's biggest banks prefer customers to take out unsecured loans, which typically have higher rates of interest, so this means they are not lending as much to clients who want asset-backed finance.

As a result, secondary, secured lenders need to step in and provide the cash flow for these customers.

"Secured lenders are able to process applications quicker and provide asset-backed clients with financial solutions and a formal bank guarantee within seven days," Mr Palmer asserted.

According to data published by the South African Reserve Bank, the value of commercial mortgages issued by the country's banks in May was 5.7 per cent higher than in the same month in 2011. However, term loan values climbed by 34.6 per cent during this time, while overdraft and credit card lending was up by 17.1 per cent and 12.5 per cent respectively.

(Property Showrooms)

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