How accessible are large mortgage loans on the high street? Are you a suitable candidate or not?

21st May 15
Islay Robinson GROUP CEO

Islay Robinson

How accessible are large mortgage loans on the high street? Are you a suitable candidate or not?

Islay Robinson

Since the Conservative victory, the outcome has been resoundingly positive for the property market at large. Many commentators have indicated that it seems as though “boom-time” has resurged. Dozens of multi-million-pound properties have exchanged hands in central London over the last week and here at Enness HQ we’ve been very busy dealing with even more large mortgage loans than usual so we can’t complain.

This is, in all likelihood, no news to you, Reader, as the media has been enthused about the bolstered market all week. It’s no coincidence that the Qatari ruling family have finalised their purchase of a £40 million property in Mayfair this week as they were waiting for the outcome. Indeed, Giles Hannah of Christie’s International Real Estate `stated he had received £250 million worth of instructions to buy central London homes since the Tory victory’ (which may or may not be hearsay). But, regardless it should be good news for the next years ahead.

Movement on the property market affecting large mortgage loans…

The result has not only shaken up the property market but also the large mortgage loans space. We are seeing a lot of movement on a high street level as the banks attempt to motivate new large mortgage loans business in line with the market. This is largely facilitated by the low Bank of England base rate which is now predicted as unlikely to rise until next summer. This is an interesting entry into the large mortgage loans sphere which is typically only catered to by private banks.

I’m speaking about the fact that in the past couple of years big name lenders have begun offering substantial loans of up to £3 million at low rates and eating into the private banks’ traditional mortgage business.

Historically, Enness have not tended to favour working with the high street when it concerns arranging large mortgage loans. However, we are a whole of a market large mortgage broker and in the past year, we have placed certain cases on the high street for those clients of ours who do not want to hold a minimum of other assets with the bank. This solution often suits our clients who do not require a wider wealth management arrangement, for whichever reason that might be.

There are half a dozen high street lenders and building societies that have now moved into the £1 million-plus mortgage space that we are working with. Indeed, now a third of one million-plus mortgages are being placed with private banks.

The reason that the high street banks have moved into this traditionally private sphere is that the big banks are attracted by the scale of the market and reduced costs in comparison to the loan size. Due to the increased due diligence that needs to occur since the Mortgage Market Review last year it makes more sense to do fewer deals for million pound plus borrowers, rather than just doing a couple for people borrowing a hundred thousand or so.

Large mortgage loans on the high street can be very fitting for many million pound plus borrowers. It all depends on the client’s circumstances. For example, if you are a UK-domiciled resident borrower with a clear, taxable income stream than many of the rates being offered by the high street – such as HSBC’s recent low 5-year fixed rate – are definitely going to be a winner.

The trouble that we have with most of our clients is that high street “jaw-dropper” rates are advertised as rendering well to larger mortgages but only, in fact, suit those with very generic incomes. In our experience, most millionaires have anything but simplistic income streams. That means that the high street banks aren’t always the best port of call for them.

When we reference complex income streams what we mean is those with financial arrangements outside the norm. And outside the norm tends to be any irregular sort of pay. So, even if you are a banker and a lot of your income is generated through bonuses and you can show a bonus history the sirens will have been set off in the high street banks’ minds. High street banks also don’t favour entrepreneurs and those who are dependent on investment income, the elderly and non-domiciled individuals with overseas income.

And for high net worth individuals?

That’s not to say that high street lenders are a no-go zone for millionaires. It’s just important to remember that it’s all situation dependent. A lot of high street lenders offer the option of longer term mortgage lengths with loan repayment over 25 or 30 years, which is ideal for clients’ family homes. Private Banks, contrastingly, set up repayment at within five years – although this is good as you often have more chances to remortgage.

A high street solution is also only accessible if you have planned ahead and have the luxury of time at your fingertips. What is not advertised by the high street banks is the fact that their processing schedule can take up to 6 weeks – and waiting that long for a decision can sometimes affect whether you secure a property or not.

Large mortgage loans are relatively accessible if you fit the above criteria but only up to a specific point. For example, if you are seeking a loan above £3 million it’s almost definitely going to be best-placed with a private bank.

It is also not as simple to compare just the high street and the private banks. The bulk of the business that we in fact transact is with the contender banks – such as Harrods Bank or Investec, which cater to the wealthier borrower without requiring you to deposit assets with them. We are also beginning to see some traditional private houses relaxing their requirement for assets under management if you have the right client.

If you are interested in exploring some rates that you believe appeal to you please feel free to get in touch with me at Enness. As one of the largest million pound brokerages in London we have exclusive insight into the large mortgage loans banking trends and will be able to let you know which institution is best for you to place your mortgage with.