As economic slowdowns continue around the globe, more and more loans are being affected by the coronavirus crisis. Understanding what is likely to happen in the upcoming months can help investors make smart decisions in the wake of the virus.
For many lenders, the main concern right now is payment defaults. With so many people out of work, things like mortgage payments are often being overlooked, and the fact that so many shops and restaurants are closed is also causing an increase in defaults on commercial loans. The general disruption from the virus also means that many borrowers are starting to turn to their lenders for help providing liquidity for short term emergencies. This effect is especially noticeable in the fields of hospitality, entertainment, and retail.
There will also be changes due to new government regulations. Many local and federal governments around the world have been enacting measurements like longer time to pay loans and various government stimulus and loan plans. This may mean that the way lenders typically handle loans and payments may slightly change. They can expect to see more regulation favoring longer foreclosure processes and higher mandatory waiting periods between payments.
All of the uncertainty in the market is also likely to cause some long term effects for lenders and buyers. Most firms note that current development plans are proceeding, but many plans for the future have been halted. In many cases, borrowers in the process of finalizing loans are beginning to ask for negotiations on their current terms. Until the economic unrest starts to calm down, lenders are unlikely to have a lot of borrowers interested in funding future projects. This may lead to more favorable interest rates for those looking to get a loan in the future.
Not all outlooks are entirely grim. Current supply chain disruption has made many businesses rethink outsourcing production. Some believe that there will be more lending in manufacturing fields as businesses start looking for warehouses and factories located in the United States. Another bit of good news is the fact that most experts predict the disruptions to the lending market will be brief.