High street banks take on the private lenders in the large loans sector
Traditionally, as a borrower looking to take out a mortgage above £1 million, a private bank or boutique lender may have been able to meet your needs best. However, you may find that some high street lenders could now offer you an alternative range of products.
We have seen some high street lenders now attempting to muscle in at the top end of the mortgage market. In response, some private banks have been relaxing their entry criteria in order to remain competitive. This, on top of mortgage interest rates currently sitting at all-time lows, especially for mortgages above a million, is great news for some borrowers.
How are high street lenders competing with private banks?
Historically, private banks have often asked their high net worth clients to place Assets Under Management (AUM), as part of the mortgage deal. However, with high street lenders now moving into the large mortgage loan market, and not asking for AUM, private banks are being pushed to re-think their offering.1
Caroline Burke, Senior Mortgage Manager at Large Mortgage Loans, comments that, “After the financial crisis in 2008, many high street lenders would only offer mortgages for a maximum loan amount of £1 million, and the terms offered by the few lenders who would consider offering larger loans did not compare favourably with the terms offered by private banks.
“Nine years later, most high street lenders are now keen to compete in the £1 million plus mortgage market, and can offer products with lower arrangement fees and lower interest rates than private banks, and they have no requirement for a wider banking relationship.”
So how attractive are these new high street bank mortgage products? With no AUM required and potentially very attractive rates and terms, high street mortgage products could be very attractive to some borrowers. However, it is also important to remember that despite this, high street banks still have more restrictive underwriting criteria. Borrowers with a high income and a healthy credit level are most likely to be accepted.2
Should you choose to borrow with a high street bank or a private lender?
Despite their broadened offering, high street banks are still less able to compete with many private banks when it comes creating bespoke mortgage products, especially if the client’s circumstances are complex.
Burke comments that, “Private banks can consider the overall asset position of a potential client, rather than solely basing their lending upon rigid criteria regarding income multiples and affordability.
“Private banks can also help in situations where a property is held within a complex or offshore structure; where income is earned offshore or in a foreign currency; where the lending is required in a foreign currency; in bridging situations; for buy to let lending; and also in renovation and development projects.”
This increased competition is doubtlessly good news for consumers, regardless of whether they choose to take out their mortgage with a private lender or a high street bank. Whether the challenge made by high street banks will continue, is yet to be seen. This means that acting sooner rather than later may be in the best interest of million plus mortgage borrowers.
Your home may be repossessed if you do not keep up repayments on your mortgage
