Lenders' profits hit by property value declines, BoE warns

The sharp decline in commercial property values in the UK has dragged down the profits of the country's most active real estate lenders, the Bank of England has cautioned in its latest Financial Stability Report. The central bank said the 16% fall in commercial property values since last June had raised risk of losses on the UK's £174bn (EUR 224bn) outstanding commercial real estate loan book to 'material' values. 'Falls in property values erode the equity buffer with which borrowers can withstand financial shocks, implying higher losses on commercial property loans in the event of default,' the report said. 'At the same time, lower collateral values could result in commercial property companies finding it difficult to refinance existing loans, which may increase the probability of default.'

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