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It is well reported that London continues to buck the house price trend in the UK – common reasons like the weak pound, perceived stability of the market and lack of property available are regularly discussed in the media and the flood of money from overseas is likely to keep prices increasing.
It is no surprise therefore to see the number of new mortgage lenders competing in this area to be increasing. The high-street regulars are slowly increasing their loan maximum loan sizes and reducing their rates to attract wealthy UK residents. Stable property prices, low loan to value loans and strong incomes make these loans a good bet.
For larger loans, there is a belt of UK based Private Banks who are dominating the market (Barclays Wealth and Handelsbanken for example). These lenders are able to lend to non-resident and non-domicile individuals and can take the clients full circumstances into account when granting a mortgage. Solutions using offshore income, background assets, limited companies and high loan to value with annual bullet repayments are very common.
Private Banks typically insist on a relationship being built alongside the mortgage, like assets to manage, cash on account or the client to bank with the lender for example. This is in contrast to the high street’s ‘transactional’ or ‘one-off’ approach and provides a much more profitable arrangement for the bank as there are more services to provide and can sometimes lead to a lower rate on the mortgage (1% over cost of funds is not uncommon, for example, if there is another piece of business done simultaneously)
This full-service mortgage approach is becoming increasingly popular for mortgages over £1m and has seen the number of lenders competing increase very rapidly this year. Enness Private Clients, A London Based High Net Worth Mortgage Broker, reports sourcing loans for wealthy individuals from the common sources, including Switzerland and the Channel Islands, but also lenders from Luxembourg Canada, Singapore and Dubai this year.
Islay Robinson, a Director at Enness, Says “Competition in this area is becoming very keen and we have built relationships with 15 or so new lenders this year alone. These banks are happy to lend large sums against UK property as the clients who buy them are very wealthy and can generate significant income for a lender over the life of the relationship from services other than simple mortgage lending.
“The number of lenders in the market also opens up the opportunity to negotiate and sculpt mortgage solutions which are in contrast to the ‘box-ticking’ approach on the high street – this gives better flexibility and efficiency and is a much better approach to lending.”