Since the credit crunch, many mainstream lenders have tightened their underwriting criteria. There are fewer mortgages at high loan to values within the large mortgage market, and banks and building societies need much more in the way of documentary evidence than they did in the mid to late 2000s.
One other way in which many lenders have sought to control their loan book is to stop high net worth mortgages above £500,000 or £1 million. A number of high street lenders have withdrawn from the large mortgage market altogether, making it more difficult for high value mortgage clients to get the loan they needed through their local bank.
With new figures showing the mortgage market is as strong as it has been for a number of years, one lender has launched a new deal available to clients wanting to borrow up to £3 million. Is this a one-off, or are others set to follow suit?
New figures from the Council of Mortgage Lenders show that mortgage lending in May jumped to its highest level since the recession. Gross lending rose by 21 per cent to £14.7 billion, the highest monthly increase since October 2008. The total is also 17 per cent higher than the same month a year ago.
“Falling mortgage rates are clearly enticing high value borrowers into the large mortgage market,” says Islay Robinson, CEO of London mortgage broker Enness Private Clients. “The cost of loans – particularly fixed rate deals – has fallen over recent months and so demand for these products has soared.”
Figures from leading mortgage brokers show that a significant proportion of mortgages – around 80 to 90 per cent in most cases – are being arranged on a fixed rate basis. Around two thirds of these are on two year fixed rates, many of which are now available at below 2 per cent.
While fixed rates are falling, large mortgage customers have still been served best over recent years by specialist broker advice and loans from less traditional lenders. But, is that about to change as a high street name launches a ‘large mortgage’ deal? We look at this new product next.
While many lenders are competing with lower and lower rates, some are loosening their criteria in other ways in order to attract business. Indeed, the FT reports that ‘banks and building societies are also targeting the million-pound mortgage market.’
Accord Mortgages, part of the Yorkshire Building Society, has launched a two year fixed rate at 1.99 per cent, available to a maximum of 75 per cent loan to value. However, the difference with this deal is that it is available to high value mortgage borrowers seeking up to £3 million.
“It’s certainly a bold step from a traditionally circumspect lender,” says Islay Robinson from Enness Private Clients. “It’s nice to see a mainstream lender offering a high net worth mortgage deal – even if it is just for seven days – but in my experience building societies rarely have the underwriting expertise needed to help high net worth clients.
“Brokers who specialise in million pound mortgages have a far better understanding of the income arrangements and property ownership issues that affect high value mortgage clients. So, while the Accord deal is certainly a good one, I’d be intrigued to see how many million pound mortgages they actually agree.”