The lender confirmed that, despite expecting to make a profit of £20 million during 2008, it was unable to secure financing.
Stephen Johnson, sales and marketing director at Commercial First, was damning in his assessment of the market conditions that had forced his company to suspend all new lending.
He said: “We have explored every opportunity to obtain new funding. We have a business that made a profit of £13 million last year and will make in excess of £20 million this year, with a balance sheet of £1.6 billion in performing mortgage assets at an average loan-to-value (LTV) of 68 per cent and 4 per cent margin – yet we are still unable to obtain financing. It is abundantly clear the credit market has failed.”
He added: “We have entered into a period of consultation with our staff and are exploring all available avenues to enable us to return to the market quickly.”
This followed the announcement that Base Commercial Mortgages had halted new broker registrations as the organisation sought to control its new business levels.
Nick Reeves, head of commercial at The Business Mortgage Company, said: “Given the current climate, it is unsurprising that Commercial First and a number of others have had to suspend lending as they are reliant on the securitisation markets to raise funds and these are effectively closed at the moment.
“However, this announcement does not indicate the demise of the self-cert commercial mortgage and it is still possible to arrange self-cert loans up to 75 per cent LTV.
Lenders who survive in the commercial self-cert market are likely to be less dependent on securitisation markets and fully underwritten by UK banks.”