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For years, high net worth mortgage borrowers have been finding that many mainstream lenders have turned their back on them. Getting a large mortgage from a traditional bank or building society has been tough since the credit crunch with many lenders reluctant to agree a million pound mortgage.
Now, though, many of the country’s leading names are back in the large mortgage market and are offering what the Financial Times calls ‘a cheaper, but less flexible alternative to private banks.’ Many high street names have returned to the high value mortgage market, although this doesn’t mean that you’ll automatically get a large loan if you need one. Keep reading to find out more.
The Financial Times reports that Skipton Building Society, Woolwich, Accord, Clydesdale Bank, Metro Bank, Nationwide, Santander and Halifax all offer mortgage rates for homeowners wanting to borrow £1 million or more. However, getting a million pound mortgage isn’t as straightforward as walking into your local branch.
“The income needed to secure a large mortgage varies significantly from lender to lender and so, while more banks and building societies are in the high value mortgage market, expert advice is often useful,” says Islay Robinson, CEO of London mortgage broker Enness Private Clients.
“For example, if you wanted to borrow £2 million at 60 percent loan to value you’d need to earn £400,000 to qualify for a deal from Halifax, Santander or Woolwich. However, according to figures in the FT you’d need to earn £441,000 with Nationwide, £452,000 with RBS or £486,000 with Accord,” he added.
The calculations are based on two people buying in joint personal names, both aged 39 with two dependent children, with good credit and no debts or school fees.
Over recent years, private bank mortgages have become increasingly popular with high net worth finance clients as mainstream lenders have pulled out of the large mortgage market. Banks have been able to agree on high value mortgages at excellent rates – sometimes as low as 1.5 to 2 percent above the cost of funds – particularly if you have assets that you can move to the management of the new lender.
“Private banks continue to be an excellent choice for many high value mortgage borrowers,” says Mr Robinson, the London mortgage advisor. “While their arrangement fees may be higher than some of the high street lenders, they can often offer some exceptional deals and the flexibility and underwriting expertise not available through mainstream banks and building societies.
“They are particularly useful for clients who have more complicated income arrangements such as offshore income, trusts or dividends. They can also structure deals in a more suitable way which, for many high net worth clients, is better than simply chasing the lowest headline rate,” he adds.
The FT also reports that ‘some private banks have become less insistent on the borrower transferring large amounts of money for them to manage in recent months.’
“In the past, many private banks have required clients to move assets to them immediately, but increasingly they are prepared to take a longer term view for clients with a good financial profile,” says Mr Robinson.
For more information on the differences between private and specialist banks, take a look at our up-to-date guide, or contact us for a free and personal consultation anytime.