Lenders have provided far more capital to the UK property market than official statistics show, and, what is more, these lenders appear to be increasingly willing to take on riskier types of loans.

These conclusions, contained in a report from De Montfort University's department of land management, are certain to raise eyebrows amid the emerging economic downturn, a time when the ability of tenants to pay rents will increasingly require scrutiny.

According to the data, total property loans outstanding at the end of the third quarter 2000 were pounds 64.16bn, nearly 30 per cent higher than the figure of pounds 51.6bn calculated by the Bank of England.

Of the lenders surveyed, 85 per cent said they intended to increase the amount of real estate lending conducted over the 12 months beginning October 2000.

The percentage of lenders prepared to provide money for speculative development has risen from 20 per cent in 1999 to 37 per cent.

"In a competitive market, lenders are sacrificing repayments, extending interest-only periods and taking a greater residual exposure," the report concludes. "This continues to cause concern."

Lending to property is a subject that is of great interest to bank regulators. The boom-bust nature of property cycles and the industry's dependence on borrowed money has tied the fortunes of lenders closely to its own.

Property crashes in the mid1970s and the early 1990s led to crises in banking in the UK, the US and on the Continent.

There are signs from the US - where detailed data on the status of individual property loans are quickly revealed in the marketplace - that it is not too soon to begin worrying about lending.

This week, Moody's Investors' Service placed about dollars 115m (pounds 80m) of Mortgage Pass-Through certificates under review for a possible downgrade, the first time it has done so for commercial mortgage-backed securities in more than a year.

The loans were backed by well-diversified loan pools to a wide variety of borrowers and property types, were not heavily exposed to a single, troubled sector and carried investment grade ratings from Aa2 to Baa3.

Six loans, accounting for 7.3 per cent of the pool balance, are in special servicing, a status for loans that are at least 60 days delinquent in making interest payments.

Howard Esaki, CMBS research analyst at investment bank Morgan Stanley, says the data show that loan delinquencies are already rising.

He says there is no need to brace for a repeat of the debacle of the last decade. "Our forecast is that delinquencies will continue to rise, but they will not rise as much as they did in the last cycle," he says. While delinquencies peaked at about 7.5 per cent of all loans, the forecast is that they may peak at about 2 per cent, against 1.2 per cent currently.

The speed with which loans are becoming delinquent is also different.

"In recent cycles, it took 48 months or more (from the trough or point where the economic downturn began) for total delinquencies to increase by 100 basis points," Mr Esaki says. After the fourth year in both cycles, delinquencies rose at an even faster rate, with another 100 basis point rise during the next 12 to 18 months.

However, the current cycle may be different, partly because so much more information is available in the public domain as the result of the growing dependence on the public market by originators of commercial mortgages.

Lenders in the US markets sell on their loans to "conduits", which then sell them to investment banks, which turn them into mortgage-backed securities. As publicly held securities, their issuers are required to provide information about their underlying loans.

Thus, Mr Esaki says, other lenders can react quicker to changing market conditions.

But in Europe, analysts at Morgan Stanley note, mortgage backed securities issuance is negligible. It may be some time before anyone is able to see how well underlying loans are performing.

Is there a danger that UK lenders will continue to dispense new money, oblivious to the growing uncertainty around them?

Of course, Europe is not the US, and in spite of growing concerns about economic activity, Europe is not experiencing the gloom that prevails on the other side of the Atlantic.

There are signs that lenders are becoming more cautious - the De Montfort study shows that maximum loan-to-value ratios in 2000 were lower than those in 1999.

However, UK lenders in particular are ready to embrace more risky mezzanine finance - the amount of mezzanine debt more than doubled between 1999 and 2000 - although direct equity finance is down dramatically.

But if UK lenders are more cautious on equity, their international competitors - excluding the German banks - are not.

Equity finance from this category in 2000 was nearly 10 times the level in 1999, and international lenders also doubled their provision of mezzanine finance.

These data make for interesting reading, but nowhere more so than on the desks of European bank regulators.

As lenders of last resort, they, perhaps more than anyone, need to know in great detail just what their charges are up to.

Sunshine, it is said, is a wonderful cure.