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Large Mortgage Loans Part 2 – Competition Increases


Now winter has been and gone we can consider ourselves fully ensconced into the New Year and it is important to build on the early signs of positivity.

Although there are still some negative undercurrents around the economy, with the odd whiff of a banking scandal still emanating around certain quarters, the property and mortgage markets seem almost buoyant, especially in the busy London market.

One Prime London Estate Agent, whose applicants we help to secure finance, recently told me that they had no fewer than 62 viewings on one un-modernised property in Notting Hill, which subsequently went to sealed bids.

So whilst the market for quality property is moving, the good news is that this is being further supported by even more lenders re-entering the market.

Last month, for example, saw the release of two more mainstream lenders moving back into the Large Loan Market which is great news for many buyers in London. For loans between £1m and £2m this area of the market has been neglected for a while by the High Street, with borrowers having to jump through the hoops of Private Banking institutions, which can slow down the process, involving both the transfer of bank accounts and assets.

The return of High Street lenders into this niche avoids all this and with others set to follow suit in the next few weeks it could be a competitive time to obtain a large loan.

As has been mentioned before, this all makes sense to High Net Worth individuals who may have been traditional cash buyers. After all, why tie up all your cash when you can borrow 50% to 60% loan-to-value easily at just 2.24% fixed for 2 years, (4.4% APR) or 2.89% fixed for 5 years (4.8% APR).

In fact, there is every evidence that rates are set to get even lower, with at least a couple of lenders now offering rates below the 2% level.

ING Direct, for example, who are about to be swallowed up by Barclays, are nonetheless going out with a bang in offering the lowest tracker product priced at a tasty 1.94% for 2 years, (3.7% APR).

With Investec the latest big name entrant to release their new large loan offering competition in the Large Mortgage loan space is certainly hotting up.

The real question is how, or even if, Private Banks will hit back. Whilst one school of thought is that they will remain happy and calm in the shadows, we have already seen signs of some of them starting to loosen up on their criteria which demands assets under management. This is a very interesting move and whether this leads to a 2 tier private banking lending market remains a possibility.

What is evident, however, is that this year is gearing up to be one of the most competitive years in the High Net Worth market for many years, if not ever.


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