Low risk home loan borrowers who have a mortgage at a low loan to
value, so that they have significantly more equity in their homes than
the amount they have borrowed, are the main beneficiaries of the record
low interest rates currently available in the UK. This low rate
environment in the current mortgage market means that home loan lending
is rising.
In addition to the low rates available (due to the
Bank of England’s base rate holding at a mere 0.5 per cent for nearly 5
years), there has also been increased competition between lending
institutions and two government schemes to encourage lending. These
facts have led to some of the lowest mortgage rates the UK has ever
experienced. But the benefits of this low rate environment are really
only available to the low risk borrowers.
High net worth mortgage clients benefiting from some of the lowest mortgage rates ever
With the UK governments Funding for Lending and Help To Buy schemes
offering banks and building societies access to inexpensive funds they
are able to offer some genuinely low rates, especially for high value
mortgage borrowers who are perceived as low risk.
It is these
high value, large mortgage borrowers with low ‘loan to values’ that have
benefited most because the most competitive mortgage deals are reserved
for those with a deposit of 30 percent or 40 per cent; a level that is
plainly unlikely to be available for young first-time buyers. The real
winners in this situationare the relatively small numbers of potential
home buyers who fall into the low risk category of lending.
Given that first time buyers are the life blood of the property market,
this situation cannot continue forever without further damage to the
already stagnant market. There will come a time when the lending
criteria imposed by banks and building societies will have to be
adjusted if they are to have any volume of business in the home loans
sector. There is an enormous potential market for first-time
buyersmortgages that is not being serviced while the few who are
fortunate enough to be able to borrow will see increasing competition
between lenders for their business. Loans at higher LTVs may soon start
to appear in greater numbers.
It is obvious that certain types
of borrower with plenty of equity and a high, secure income have seen
the cost of their mortgages fall significantly in recent years. Islay
Robinson, director of million pound mortgage specialist Enness Private
Clients believes that deals for borrowers with a 30 per cent to 40 per
cent deposit available have rarely, if ever, been lower. And, the
private banks and other non-traditional lenders thatLondonmortgage
brokers speak to on a daily basis have a keen appetite to lend to high
net worth finance clients.
For the mortgage market in the UK to
return to pre-credit crunch levels, these sorts of deals are going to
have to become available for first time buyers and those borrowers with
only 10 to 20 per cent of the purchase price available as a deposit.
Nevertheless, low risk, large mortgageborrowerswill continue to benefit
from superb deals.