How concerning is the rise in ‘extend and pretend’ for UK commercial property loans?

The surge in net lending by banks to commercial property firms may in part reflect borrowers being forced to refinance loans on buildings they have been unable to sell. But in contrast to the GFC, when net lending also initially surged as loans weren’t paid back, banks today are happy to oblige, with a substantial balance planning on increasing the availability of credit further in Q4. And with capital values rising, loan-to-value ratios low and interest rates set to fall back, we think that banks will eventually get paid back.