How are lenders assessing the current private market?

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“There remain economic unknowns. The cost-of-living for consumers is through the roof. The cost of private capital remains the same. And there are still unknowns with respect to real estate valuation, which adds question marks into lenders’ underwriting.”

Real estate valuations continuing to pose a challenge in 2024

In the current bumpy market, it may be difficult to ascertain the value of loans funded a year or more ago – particularly as appraisals speak to comparable sales data, rather than forecasting precisely where home values are heading in the months ahead.

During unpredictable times, Vyner described it as “prudent” to question home values, even if the nature of a private mortgage is generally short-term – especially since an agreed exit to the mortgage term is no easy feat for many borrowers at present.

“As we’ve seen, quite a bit can happen in one year’s time, especially when qualifying for traditional lending,” he said. “The stress test is no less difficult than it was a yar ago and especially if other private mortgage lenders are also aggressive with lending practices, the exit strategy is no simpler.

“Regarding property types, property locations and loan to values (LTVs), I say that in the absence of a rising market, an increase in underwriting scrutiny will naturally provide fewer bailout options for homeowners in financial distress, including situations that would’ve been fairly easily approved and funded in prior times.”

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