Private banks maintain their appetite to lend

Buyers of prime central London properties can now obtain competitive mortgage rates of less than 2 per cent, as private banks continue to show a strong appetite for lending on upmarket homes.

Specialist high-end mortgage brokers say there are still plenty of options for wealthy clients who are willing to use them as intermediaries – as they have access to a wide range of UK and international private banks keen to lend.

Melanie Bien, director of mortgage broker Private Finance, says the availability of finance for prime properties in the capital looks good for 2011. She notes that private banks are “making the right noises” about wanting to lend more in 2011.

By contrast, mortgage availability in the mainstream market looks unlikely to improve. Last month, the Council of Mortgage Lenders said gross lending would remain static at £135bn this year.

Mainstream mortgage rates have also worsened this week following the withdrawal by Natwest of its best buy tracker rate of
1.99 per cent – Bank of England base rate plus 1.49 per cent. It has now increased the rates across its range of mortgages.

Right now, the market-leading tracker rate is HSBC’s 2.29 per cent – Bank base rate plus 1.79 per cent – which is available on loans of up to 60 per cent of a property’s value and with no fees until February 6.

Earlier this week, research published by Investec Private Bank revealed that access to finance remains a “major issue” for those looking to purchase properties worth £1m or more.

Almost half of estate agents, mortgage brokers and developers surveyed for the Investec £million Plus Property Market Barometer said the availability of credit to purchase upmarket properties is either “poor” or “very poor”.

However, mortgage brokers argue that wealthy clients still have access to the cheapest rates in the market if they are the right type of client.

Scandinavian bank SEB Private Bank, a new entrant to the UK market, is currently offering rates as low as 75 basis points – or more typically 1 per cent – above the three-month London interbank rate (Libor). Three month Libor – which is the rate at which banks lend to each other – is currently 0.75 per cent, giving these mortgages an attractive pay rate of about 1.5 per cent.

However, SEB requires clients to transfer over a minimum of £500,000 or 10 to 20 per cent of the loan amount in investable assets.

Nigel Bedford of Largemortgageloans.com says only really good clients would be able to obtain the lowest rate – and would have to transfer even more than the minimum amount of assets to SEB.

“There are still some really good deals out there for wealthy clients,” he explains. “There is likely to be a bit of a squeeze on high loan-to-value finance, particularly on interest-only mortgages, but lack of funding won’t be a big issue.”

In fact, many experts observed healthy activity in the high-end of the mortgage market in the last few weeks of 2010.

Mark Harris, managing director of Savills Private Finance, says he has recently arranged mortgages on properties worth £12m, £15m and £21m. “If the client profile is right there is plenty of appetite,” he says.

Simon Gammon of Knight Frank Finance agrees. “The last quarter of 2010 was the best quarter we’ve ever had in terms of new business.” He says there have been a number of new, niche foreign banks entering the market in recent months. They include Ahli United Bank and Scandinavian banks such as Nordea
and SEB.

Bien believes some private banks increased their loan book at least 50 per cent last year. A number are having big recruitment drives to ensure they have the bankers necessary to increase their loan books.

Investec, ABN Amro and EFG Private Bank are all keen to receive more
mortgage applications this year, according to Aaron Strutt of broker Trinity Financial Group.