By Simon Packard
Dec. 18 (Bloomberg) -- U.K. banks face an increased risk of default on some of the country’s 250 billion pounds ($403 billion) of commercial real-estate loans, the Bank of England said today.
In the past year, the longest recession on record meant the “probability of default by U.K. real estate companies has increased significantly,” the central bank said in its Financial Stability Report, which is published every six months.
Property owners may struggle to service loans as the recession and mounting unemployment boost building vacancies and depress rents. Falling property values and larger down payments for new loans mean investors, particularly smaller companies, face “significant” challenges in refinancing 160 billion pounds of loans coming due through 2013, the bank said.