"We have a database server which actually sits on a host by itself however"
A VM running on a host isn't just dependant on the compute resources of that host but the backing storage which in this case is distributed e.g. a VM running on Host3 may have the data-components of its vmdk Objects residing on Host1+Host2 (and with data-components distributed across 4 nodes if using a RAID5 Storage Policy) - thus you can understand how crucial stable and sufficient inter-node network communication is and adequate performance of the backing disks.
Thus, when investigating VM or 'Client' level latency-related performance issues the first step is to determine whether the latency is just occurring at this level (which generally indicates an inter-node network or VM-application issue) or propagated latency from issues at lower layers (e.g. 'vSAN back-end'/Disk/Disk-Group issues). This can be approached in numerous ways including vSphere Performance Graphs, vSAN Observer, 3rd party-tools such as Sexigraf or Grafana (as used by VMware GSS via CEIP data).
If there is Disk/Disk-Group issues you would need to narrow this down further e.g. a single problem Disk/Disk-Group/Controller/Node.
If there is no Disk/Disk-Group latency outside of expected norms for the device type (e.g. SSD vs HDD) then you should start looking at the inter-node communication - e.g. is the cluster flapping, are you getting dropped packets etc. . Specifics may indicate the cause such as are you using 1Gbp/10Gbps networking, multiple links and if so Active/Active or Active/Standby, using etherchannel or LACP and Load-Balancing option in use, and other potential causes such as driver/firmware on NICs updated from what to what.
Note that performance issues are often far from simple to troubleshoot yourself and/or without deep knowledge of the SME so if you have support do consider opening a Support Request sooner rather than later.
Thanks for this Bob, will open a case with support. Was odd that we were running fine under 6.5 U2c and after patching we get this behavior.