Blog Archives

Mortgage lenders make an Olympian effort

27.07.2012

With the Olympics almost upon us, we’re looking forward to relaxing and catching up with some award-winning sporting heroics over the next couple of weeks.

But before we do that, the annual mortgage lending figures from the Council of Mortgage Lenders have caught our eye. If you were awarding the traditional Olympic medals for market share, then these would be awarded as follows: gold to Lloyds Banking Group (19.9 per cent); silver to Santander (16.8 per cent); and bronze shared between Barclays and Nationwide Building Society (12.1 per cent each).

While the six largest lenders did the lion’s share of lending, the next tier of medium-sized lenders increased their market share last year. This is important because as the big lenders lose their appetite or are restricted in the lending they can do, it’s important for other lenders to step in and fill the gap, giving increased choice to borrowers. In fact, the six largest lenders may have done more lending in absolute terms (£113.8bn in 2011 compared to £110.8bn the year before) but their total share of the market declined from 81.9 per cent to 80.7 per cent last year. A modest decline perhaps but a decline nonetheless.

The larger mutuals all increased their market share, which is not surprising as Nationwide, Yorkshire, Coventry, Skipton and Leeds building societies have all offered competitive rates and terms, topping the ‘best buy’ tables over the past 18 months. They’re often more flexible than some of the bigger high-street lenders, because their size makes them more nimble. This is great for the competition and overall health of the market.

Of course, there are a whole host of lenders who don’t make it onto this list but are doing a sterling job and offer the best option for high-net-worth borrowers by a long way. I am, of course, referring to the private banks who are the lenders of choice if you have complicated income streams (bonuses, performance-related pay, retained profits in a business and offshore income, or if you require interest only).

We will never see a similar league table of market share and volumes of gross mortgage lending by the private banks but if you are interested in seeing whether they can provide a solution to your funding requirements, give us a call to find out.

Adrian Anderson
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Adrian Anderson

Why even the wealthy want mortgages

18.07.2012

It is a fallacy that wealthy people don’t need mortgages. If billionaire Mark Zuckerberg sees the need for a $5.95m mortgage on his home in Palo Alto, California, according to reports from Bloomberg, you can bet that those worth much less than his $15.7bn could also benefit.

Bloomberg reports that Zuckerberg has a ’30-year adjustable rate loan starting at 1.05 per cent’. It is likely that he has chosen a variable-rate deal, linked to Libor (the London Interbank Offered Rate) because the Federal Reserve has suggested that rates will be kept near zero for the next couple of years at least. Presumably he can also cope with fluctuations in his monthly mortgage payments, which is why he didn’t opt for a restrictive 30-year fixed rate instead.

The most interesting part is that he has a mortgage at all. But really, it makes perfect sense. If you can borrow money at such cheap rates, you can invest ‘spare’ cash you have where it will generate better returns. In this way, the wealthy can use other people’s money to make more money, which will make them wealthier still.

The other advantage the wealthy have is that they can get more favourable terms than the rest of us. Far from offering higher rates and charging bigger fees than high-street lenders, private banks often offer much better terms because they wish to attract the wealthiest borrowers. Lending is almost secondary; it is all about the client and their appetite to do other business, either at the present time or in the future.

The private banks understand that if they get someone through the door via their lending services, their wealth management side should be able to help with their investments. And for many private banks, this side of the business is far more lucrative than lending.

Some of our wealthy clients need to raise finance because they are not in a position to purchase solely with cash, while others choose to borrow against their property to assist with financial planning and to mitigate currency/tax risk.

Private banks don’t have a high-street presence so it is virtually impossible to access this finance without using a specialist broker. Banks’ lending criteria vary considerably so a bank that is suitable for one client may not be ideal for another. The broker who really understands the private banks will know not only the bank most suitable for the client but also the right banker to contact within that bank so they can access the right point of entry.

Jonathan Harris
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Jonathan Harris

Funding for lending to boost mortgage market

13.07.2012

The Treasury has announced details of its £80bn ‘funding for lending’ scheme, designed to encourage lenders to do more lending to small businesses and individuals. The idea is that reduced funding costs should mean banks and building societies can offer cheaper loans which are easier to come by.

It is simple: if lenders do more lending, they will be able to access more money from the scheme. They will also be able to access cheaper loans than those lenders who do not increase the volumes of lending they will do.

More funding is vital. Although the Council of Mortgage Lenders’ figures for lending in May suggested an increase in the number of loans being taken out compared with the same period last year, the market is still a long way off its peak. There are far fewer transactions because it is so much more difficult to get funding. Lenders’ criteria are tighter, borrowers need bigger deposits and there are fewer properties coming onto the market which is supporting prices, making it harder for first-time buyers to get a foot on that first rung.

Although we don’t know yet what rates banks will offer and whether this scheme will translate into significantly more loans, funding for lending is a step in the right direction. We hope lenders take full advantage of this opportunity to make more funds available to borrowers at competitive prices. It could be the welcome boost the market needs.

Adrian Anderson
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Adrian Anderson

Interest rates held and more QE on the way

05.07.2012

There were no real surprises today when the Bank of England announced that interest rates would be held at 0.5 per cent for another month and that a further £50 billion of quantitative easing (QE) would also be pumped into the ailing economy over the next four months.

There has been so much QE now (today’s contribution takes the total to a whopping £375bn) that even commentators in the press have had enough writing about it. There is nothing much left to say: the economy is in the doldrums and there are few other options. Some are calling for yet another base rate reduction but the preferred course of action, for the Bank at least, is to print yet more money.

But it’s the same old story on the mortgage front. While interest rates haven’t moved, some lenders are raising their mortgage rates. ING Direct has announced that from August, borrowers on its standard variable rate (SVR) will pay 3.99 per cent interest, up from 3.5 per cent. It could be argued that ING Direct borrowers still have access to one of the cheapest SVRs, even after the increase. But that is small comfort to those borrowers who are going to have to pay more each month.

Advice is more crucial than ever. We’re just past the halfway point in the year so it’s as good a time as any to take a look at your mortgage and see whether you could do better. Is it possible to remortgage? Would you get a lower rate? Call us for a chat; you might just find that there is a cost-effective option available to you.

Jonathan Harris
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Jonathan Harris