Private banks lead buy-to-let return

Private banks have started to dip their toes back into the buy-to-let lending market this month – but lending continues to remain limited on the high street.

Standard Chartered Bank, Investec, JP Morgan and Rothschild are among the boutique banks to have recently signalled an interest in lending to wealthy clients with large buy-to-let portfolios, mortgage brokers say. The return of buy-to-let lending is fuelled primarily by more stable house prices and new 2010 lending targets, according to brokers.

“We’re seeing more interesting lenders looking to lend,” says Paul Welch of largemortgageloans.com. “They tend to be the non-traditional ‘boutique’ banks that have got cash and are looking to get a good return.”

These new players are only interested in funding buy-to-let investment portfolios that are in prime locations and typically contain more than 50 properties.

Terry Pritchard of Charterhouse, the mortgage broker, says there have been some “marked movements” at the top end of the buy-to-let market over the past three weeks. “These banks are looking really closely at the quality of the clients and their portfolio,” he says. “They want to know that clients have a lot of experience in the property investment market and what other assets they have.”

Melanie Bien, director at Savills Private Finance, agrees. “While private banks will look at larger buy-to-let investment portfolios, they must be owned by the right sort of client,” she says. “This means someone with the right profile for the bank, who is considerably wealthy.”

Each private bank has different criteria and flexible bespoke terms. Pritchard says rates can vary from Libor – the rate at which banks lend to each other – plus 2 per cent for a tracker rate, up to 5.5 per cent for a long-term fix.

The First Bank of Nigeria is another private bank that will lend between £2.5m and £25m on London properties. It will advance up to 60 per cent loan-to-value at a rate of around 4 per cent, with
a 2 per cent fee. There are no restrictions on the number of properties it will lend against and all deals are bespoke, according to brokers.

Xavier Baudusseau of JP Morgan Private Bank says the bank has helped entrepreneurs raise liquidity to fund their business investments when the corporate banks have not been willing to lend. “We provide tailored solutions, sometimes linked to the client’s assets with us, to minimise the hefty margins charged by other banks,” he explains.

Bien says it is worth talking to a broker to find the best private bank for a particular portfolio. “They all have different policies and it would be impossible to work your way round them –
go to a one-stop shop who can give you the answers instead.”

While this is good news for richer property investors, funding via high street banks is likely to be slower to return, brokers warn.

Borrowers still need deposits of at least 25 per cent and there is no appetite for large deals on the high street. The Mortgage Works, which is a subsidiary of Nationwide Building Society, and BM Solutions, part of the Lloyds Banking Group, remain the two big names in the market.

But there have been small signs of competition returning to the mainstream buy-to-let market this month, with a number of new deals launched.

Clydesdale Bank, part of National Australia Bank, has re-entered the buy-to-let market, while Coventry Building Society’s subsidiary Godiva has also launched some new rates.

Whiteaway Laidlaw Bank, part of Manchester Building Society, has launched a three-year fixed rate at 4.84 per cent available at up to 70 per cent loan-to-value, with an arrangement fee of 2.75 per cent. The maximum mortgage per property is £250,000.

The bank is targeting its buy-to-let deals at more experienced landlords and has a minimum age of 30 for its loans.

Those with higher gearing aspirations could try Aldermore Bank, according to David Whittaker of Mortgages for Business.

He argues that, as a commercial bank, it is more flexible in its criteria than the high street banks. The bank has also recently signalled its interest in moving into the residential lending market.

“There isn’t a big appetite for large deals with the mainstream lenders,” Whittaker says. “Things are still tight but there are signs of confidence growing in the market, particularly with Paragon saying it is likely to return to lending this year. The market needs the return of more players to increase competition.”