Blog Archives

House prices continue to rise, according to Land Registry

28.03.2013

It might not be a lot to shout about but house prices continued to rise in February by up to 0.2 per cent compared to January, according to new figures out today from the Land Registry.

This helped offset more negative lending figures from the Council of Mortgage Lenders and British Bankers Association for the same month.

However, before we get too carried away it’s important to realise that the national average masks significant regional differences, with prices falling in parts of the country and London continuing to outstrip the rest. We expect this situation to continue throughout this year.

On the lending front, the picture is increasingly positive with some of the cheapest mortgages ever seen. Lenders continue to cut rates and offer more choice at higher loan-to-values as well, which is steadily boosting the number of first-time buyers.

There was a welcome drop in the number of repossessions in December 2012 compared with the same month a year ago but any repossession is one too many. It is also worrying that the number of repossessions in London actually rose, suggesting that the high cost of living in the capital is proving too much for some homeowners. The fact that this is happening even though interest rates are at historic lows is a real concern. It is vital that lenders continue to show forbearance towards borrowers.

Jonathan Harris
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Jonathan Harris

Private bank mortgages: better than the high street?

18.03.2013

Yesterday’s Sunday Times took at look at whether wealthy borrowers are turning to high-street lenders for large loans. The article concluded that private banks were being spurned due to strict terms, namely the need to transfer assets under management in order to satisfy the bank’s requirements to build more than simply a lending relationship.

The Sunday Times points out that there are some very cheap rates available on the high street, such as Chelsea Building Society’s two-year fix at 1.74 per cent with £1,825 fee, for those with a 40 per cent deposit. Chelsea will lend up to £5m directly from branches, while Woolwich has also increased its maximum loan size to £2m, up from £1.5m.

My fellow director Adrian Anderson was quoted in the article, saying: ‘Private bank mortgages often have conditions that might not be in the contracts of conventional mortgages.’ This is true of the private banks but it is also true of high-street lenders. If many of those borrowers with regular high-street mortgages were to read the small print they too would be spooked.

For example, Bank of Ireland recently decided to aggressively hike the margins on its base-rate tracker mortgages, despite no movement in the Base Rate. The Bank was able to exploit a loophole in the small print that many borrowers would have been unaware existed.

Private bank mortgages: room to negotiate

While private bank contracts can come with lots of clauses, this is often only a starting point. It is up to the broker to negotiate with the bank on behalf of the client to remove or alter some of the clauses until a point is reached where everyone is happy. It varies considerably from client to client: we recently had a client who was offered a deal with more clauses than usual but he made an informed decision to proceed as the pricing was so good.

Many of the clauses are in place to prevent a new client taking a mortgage and then not making any attempt to develop a relationship. Many private banks feel they have gone too far down the lending route since the financial downturn and are trying to claw back more of a relationship with the client.

So does this mean the high street is now a better option for large mortgages? We’ve said before that it might be but in our experience of large loans, it usually isn’t. This is mainly because wealthy borrowers need certain things that high-street lenders are not good at delivering:

1) Wealthy borrowers often need speed of service – something never guaranteed and often not available via high-street lenders.

2) Wealthy borrowers need a lender who understands their complex income streams – something the high-street lender which doesn’t take into account bonuses, share dividends or retained profits in a business, simply doesn’t.

Interest-only mortgages

3) And wealthy borrowers often need interest-only mortgages – again, something the high street does poorly. For example, Halifax will lend up to £7.5m but does not offer interest-only on larger loans. This is a typical stance on the high street.

We’re not convinced those borrowers requiring large loans are shunning private bank mortgages in favour of high-street lenders. But it is always good to have some healthy competition.

 

Jonathan Harris
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Jonathan Harris

Prime central London: the ultimate investment for overseas buyers

09.03.2013

There is a fascinating article in today’s Daily Telegraph which asks whether investing in property in London is the nearest you can get to safe bet. Drawing on research from estate agents Savills, the article examines the fact that the gap between property values in the capital and the rest of the country is wider than ever.

In the past five years, house prices in London have risen by 6 per cent, while elsewhere in the country they have fallen by 11 per cent, according to estate agents Knight Frank. In prime central London boroughs such as Kensington & Chelsea, the price differentials are even greater, with prices rising by 37 per cent in the past five years.

Overseas buyers

The Telegraph suggests that overseas buyers are boosting property values in prime central London, which is something we are seeing a lot of. Many of our clients are from overseas, looking for a safe haven for their money in London. Many of these buyers don’t wish to bring all their money into the country, particularly if they are planning on returning ‘home’ at some point, or only want to own property in the UK for a few years while their offspring are at university.

Private bank mortgages

Many of these overseas clients are prime candidates for private bank mortgages. The private banks are better able to understand overseas borrowers’ particular requirements and are often able to accommodate them when it comes to large mortgages. Walking into the local branch of a high-street lender is unlikely to get you very far.

Some of our overseas clients will utilise offshore trusts in a lower tax jurisdiction such as Guernsey, Jersey, the British Virgin Islands or Gibraltar. An offshore mortgage is a more tax-efficient way of buying property for many overseas clients.

Adrian Anderson
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Adrian Anderson

Is Funding for Lending failing?

05.03.2013

Figures from the Bank of England show that lending fell by £2.4bn in the fourth quarter of last year, despite the introduction of the Funding for Lending Scheme (FLS), which is supposed to unlock the log-jam in the market. The banks have been roundly criticised for not doing more lending, while the Government has also been slated for not forcing them do more.

The Bank of England did say that it expects credit conditions to improve throughout 2013. Certainly, there is plenty to entice borrowers, with mortgage rates the cheapest we have ever seen. Wealthy borrowers requiring large loans, who are not always catered for by high-street lenders, will also find that private bank mortgages remain extremely competitively priced.

Criteria: an issue for private bank mortgages?

One concern is that high-street lenders’ criteria remain extremely tight, with interest-only, mortgages for older borrowers and those with complex income requirements, extremely difficult to come by. While some high-street lenders have started considering offering large mortgages, they are not as flexible as the private banks.

With private bank mortgages, the private banks take the time to get to understand the client and what he or she is about. As long as the client has a certain wealth, or potential for this level of wealth, the private banks may be happy to consider their case, move quickly and offer pricing that even undercuts some of the best deals available from high-street lenders.

Large loans: why service is crucial

While many articles about mortgages focus heavily on rate, we find that what is often the most important factor to our clients is speed of delivery. Often, clients are in a contract race and need a million-pound plus mortgage quickly. In order to beat the competition, they may need to know within hours whether funding is possible. This sort of answer isn’t really obtainable via the high-street banks; instead, it really is the remit of the private banks.

The FLS has got off to a slowish start but rates are falling and there is some real optimism, which is good to see. Now we need to see lenders follow through and do more lending, as they have said they will. This is particularly true of those lenders who are taking advantage of the cheap borrowing rates available via the scheme.

Large mortgage specialists

If you need advice about large mortgages or private bank mortgages, get in touch. Anderson Harris deals with many private banks and specialist lenders, and can get you an answer quickly.

Jonathan Harris
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Jonathan Harris