Borrowers looking for a new mortgage deal can now add Bank of China to their list of potential lenders, as the Chinese state-owned bank is targeting the UK with competitive loan rates.
Bank of China has been providing mortgages to the Chinese community in the UK but has recently broadened the availability of its loans. It is now offering two tracker deals to a wider pool of UK borrowers.
The rates – of 2.5 per cent over the Bank of England base rate for residential borrowers and 3.5 per cent over base for buy-to-let customers for the lifetime of the loan – are among the best on the market and undercut many UK lenders.
HSBC and Woolwich have similar lifetime trackers but a number of shorter-term trackers from lenders such as Abbey and Lloyds charge considerably higher rates.
Borrowers need a minimum deposit of 25 per cent and must pass tough credit checks, as well as a personal interview at a Bank of China branch. The bank has five branches across the UK’s major cities.
Mortgage brokers said the entry of one of the world’s biggest banks would bring a much-needed boost to the UK market. Mortgages are in scant supply as many of the UK’s banks still have limited access to finance and are focused on repairing their balance sheets rather than increasing new lending. Many of the best mortgage deals have disappeared in recent weeks as lenders have increased rates to ease strong demand.
“There are lots of reasons why banks and building societies aren’t lending at the volumes they would like,” said Mark Harris, managing director of Savills Private Finance, the broker. “If some of the slack can be taken up by new foreign entrants, then that is good for the consumer.”
Brokers expect more foreign banks and other smaller lenders to enter the mortgage market over the next few years, which could put pressure on UK banks to launch cheaper deals.
Low interest rates make margins on loans attractive and demand from borrowers is far exceeding supply. Overseas banks such as Kleinwort Benson, Investec and Standard Chartered already do some mortgage lending in the UK.