London | Financial Times

Over the last six years the number of deals available to high value
mortgage clients has been decreasing. As lenders have fallen by the
wayside and those that remain have become more reluctant to lend, the
choice of large mortgage deals has fallen sharply.

However, new research has found one area of the
residential property sector which has benefited over the last six years:
those buyers who are seeking a large mortgage and have a large deposit.
Typically these buyers will be high net worth clients looking to borrow
less than 60 per cent of their home’s value. The number of deals
available to these clients has increased significantly during this time
as lenders compete for such low-risk business. Here, we look at the one
area of the mortgage market that is seeing strong competition, in
contrast to the major part of the market in the UK.

Research
from financial analysts Moneyfacts has discovered that the number of
mortgage products in the 60 per cent ‘loan to value’ bracket has
rocketed since 2007. There are now approaching 500 deals available for
people with a 40 per cent deposit, compared to just 21 in October 2007.

Sylvia Waycot, of Moneyfacts.co.uk, said that in 2007 lenders offered
high loan to values as a norm. High income multiples and sub-prime were
not automatically rejected. This all changed in 2008 with the onset of
the banking crisis. High loan to values quickly disappeared and even
today are few and far between. They were predominately replaced with the
60 per cent loan to value which is virtually risk-less to any lender
and as a result, the first-time buyer market has stagnated.

At
times price wars have broken out between lenders keen to secure high
deposit mortgage business. Banks in the UK such as HSBC have even
offered five year fixed rate mortgages at under 3 per cent.

Hugh Wade-Jones, director of London mortgage adviser Enness Private
Clients, said that while mortgage deals for first time buyers and for
those seeking higher loan to values are hard to come by, there are
plenty of deals if you are a large mortgage borrower looking for under
60 per cent ‘loan to value’. The low risk nature of this type of
borrowing has led many lenders to offer superb rates in order to attract
good quality large mortgage business.

As well as the mortgage
deals reported by MoneyFacts there are countless more products available
through private banks in the UK and overseas. High value mortgage
clients who need over 500,000 at a low “loan to value” have a superb
choice of deals right now.

The Government’s Funding for Lending
scheme has been a contributing factor to the increased choice of deals.
There were 87 new products at 60 per cent loan to value in the first few
months of the schemes introduction. However, some experts believe the
government initiative is not targeting the right type of borrower as it
was designed to help first time buyers without a large deposit. Yet the
number of new deals available for those with only a 10 per cent deposit
remains limited. It has simply improved the choice of deals for those
seeking a large mortgage, who already had a good range of choices
anyway. Only time will tell if the government’s new Help To Buy scheme
will redress this imbalance.

If you have been seeking to secure a large mortgage (one in excess
of a million pounds) then 2013 has been a year when you were likely to
find a bigger choice of deals than at any time since the start of the
economic slump. More and more mainstream banks and other lenders have
been targeting the high value mortgage market and the choice of million
pound mortgages in the UK is increasing.

Some well-known lending institutions are now
considering lending over 1 million when previously their limit was
perhaps half of this amount. However, many mortgage brokers have urged
high net worth mortgage clients to take professional advice before
approaching a high street lender directly because many of them do not
have the underwriting experience to handle very large mortgages and
complex financial arrangements.

Santander, Investec and Scottish
Widows have launched large home load products aimed particularly at
professionals, who are likely to have well-mapped out career paths.Other
well-known lenders said to be considering million pound mortgages
include the Woolwich, HSBC, NatWest, Nationwide and Halifax.

During recent years many mainstream lenders withdrew their large home
loan offerings and the smaller private banks stepped in to fill the gap
and offer high value mortgages. However, as house-buying activity in the
prime UK property market continues to increase, more banks and building
societies have begun to offer larger loans again. Some are offering
two-year fixed rate deals at under 2 per cent for loans up to 5 million
but these are likely to be available only for those with straightforward
financial affairs and not for those with complicated income
arrangements.

Lenders tend to charge higher arrangement fees for loans in excess of 1
million but if that comes associated with a very competitive interest
rate then it is often worth paying when factored in to the lifetime cost
of the mortgage. Private banks, with their willingness to consider less
than straightforward arrangements with regard to income and ownership,
are still likely to be the best option for wealthy borrowers with
complex affairs. There rates are not significantly higher than the
mainstream lenders and private banks bring added expertise and
flexibility to the arrangement as well as specialist underwriters used
to dealing with high net worth finance clients. High street lenders
without this experience to properly assess a complex financial situation
usually just do not approve the loan.

Some private banks may
require a borrower to transfer some assets under management to secure a
low rate, but this is often a small price to pay for the savings that
can be made on the monthly repayments of a million pound plus mortgage.

While many more lenders will now consider a high net worth mortgage
client than in the past 5 years, many simply do not have the
underwriting expertise to agree a deal for borrowers with complex income
streams according tothe London mortgage adviser Enness Private Clients.
Most high street banks will only consider million pound mortgage deals
for clients with very straightforward income and assets. Consequently,
most high value mortgage borrowers will still be better served by
speaking to a broker who can approach a lender who they know understands
their particular situation.

Tag: London

More Choice of Mortgage Deals for High Deposit Borrowers

Large Mortgage Choice Greater Than Ever