It has been frequently discussed in the news and other media about how the London property market is bucking the property price trend in the UK. There are a range of reasons why this should be so: the property market in the capital is seen as a stable place for investment, the value of the pound is weak and there is a limited supply of available and desirable property. Whatever the reasons for the boost in the high value residential property market in London, what is clear is that foreign buyers continue to buy.
In the wake of this surge of international buyers it is not surprising that there is also a new style of mortgage lender coming on the scene. Even the traditional high-street lenders are gradually reducing their interest rates and increasing their limits on maximum loan size in order to attract both wealthy UK buyers and also the overseas buyers.
As property prices are showing greater stability right across the country and buyers are contributing larger deposits many of these lenders are again viewing mortgages as a good bet for the first time since the start of the global economic crisis.
For those seeking large mortgages that still exceed the typical maximum loan amount of the traditional lenders ie those in excess of a million pounds, UK buyers can benefit from the significant number of UK-based private banks. Some of these, such as Handelsbanken and Barclays Wealth are dominating the market for large mortgages for high net worth individuals. Lenders such as these allow non-resident and non-domicile individuals to borrow a mortgage. They will take the borrower's full financial circumstances into account when deciding at what level to agree the mortgage lending. They will take a wider view of the solutions available to repay the loan such as using offshore income, background assets and limited companies. They also commonly consider high loan to value amounts with an annual repayment where this suits an individual's financial situation.
The main reason why private banks are prepared to be more flexible when it comes to mortgage lending is that they typically view the mortgage as the start of building a relationship with the client. Their longer term aim is to manage other assets and provide regular banking facilities and services to the client. So such arrangements can benefit both the private bank and the client. The client obtains a mortgage of the type and value they desire at a reasonable rate of interest (often discounted further depending on how much of their personal banking business they transfer to the private bank). And, of course, the bank benefits from all the additional services it provides.
More typically in the UK a mortgage is seen as a standalone transaction – one that could be done with any bank or building society and not necessarily with your regular bank. People looking for a mortgage would consider cost, interest rate, penalties, lending criteria and availability as more important than obtaining the mortgage from a particular lender. Indeed the high-street lending institutions encourage this approach by competing with each other on the factors that affect the customers' choice.
So the private bank approach is quite a departure from the traditional mortgage route in the UK but this full-service approach is now more and more popular with customers looking for large mortgages (typically a million pound mortgage or more). With the consequence being that there is more and more competition between this type of lender to secure the business of high net worth individuals. London mortgage brokers report sourcing loans for wealthy individuals from the traditional sources such as Switzerland and the Channel Islands, but also from lenders in Luxembourg Canada, Singapore and Dubai.