We all know how tough it is to get a loan if you have a poor credit history or
are a cash-strapped first-time buyer. But what is the picture like at the
other end of the mortgage market? Have conditions become just as tough for
those who borrow millions?
1. The market has shrunk. “The credit crunch has made it more difficult to get
mortgage finance, and the top end of the market has not emerged unscathed,”
says Melanie Bien, of Savills Private Finance. Because cash is so expensive
in the current climate, many banks and building societies are now reluctant
to lend larger amounts. “Lenders are no longer interested in the top end of
the market,” says Gary Festa, of HFM Columbus, a wealth manager and mortgage
broker. “Lenders are increasingly capping their loan offerings. Nationwide's
cut-off point is £500,000, as is the Chelsea Building Society's for any
scheme other than its standard variable rate.”
2. You can still find big loans. “The death of the million-plus mortgage has
been greatly exaggerated,” says Jonathan Cornell of Hamptons International's
mortgage division. “There are plenty of lenders happy to offer larger loans,
and borrowers still have a full range of options: fixed, tracker and
offset.” Many of the big high street names are still prepared to advance
more than £500,000: RBS and Alliance & Leicester will lend up to £1
million, Abbey and Woolwich are prepared to lend up to £2 million, while
Lloyds TSB will lend up to £5 million.
3. Rates have risen. “It is still possible to get larger loans, but it is
undoubtedly true that many of the cheaper rates will not be available,” says
David Hollingworth, of London & Country Mortgages. While the cost of all
home loans has risen, the cost of larger mortgages has increased
disproportionately.
4. Fees have risen too. “If you can find a lender prepared to arrange a loan
in excess of £1 million, the fees become crippling, even for those with up
to 50 per cent loan-to-equity,” Gary Festa says. Fees of several thousand
pounds are not uncommon. Intelligent Finance charges a staggering £12,000 as
a fee for loans in excess of £2 million, while Barclays charges a £5,000
arrangement fee for a loan of £1 million and adds a further £5,000 for every
extra million.
5. You need a larger deposit. In the mainstream mortgage market, it is now
almost impossible to borrow more than 90 per cent of the purchase price of a
property; at the very top end, you need to come up with a much larger
deposit, however. “Lenders have tightened up considerably this year so
typically a borrower is going to need to put in at least a 25 per cent
deposit to borrow £1 million,” Cornell says.
6. Look elsewhere. Private banks are picking up much of the high-end mortgage
business, says Gary Festa. “Private lenders rarely looked attractive in the
past, but many of them do now look good compared with the limited retail
offering.” Smaller niche players such as Coutts or Arbuthnot Latham
specialise in private banking, but mainstream high street banks such as
Barclays or HSBC also offer private banking services to wealthier clients.
7. Private banks offer good value. "It is well worth taking a look at the
private banks,” Bien agrees. “While it used to be the case that you would
pay a premium for the tailored service that comes from a high street bank,
this is no longer so: private banks have been raising their rates more
slowly than the high-street players.”
8. Deals are made to measure. Borrowing from a private bank is a different
proposition from applying for a mortgage with a mainstream lender. “Cases
are underwritten individually according to the deal and the person, so it is
very difficult to give specific rates. But generally speaking they will
offer around 0.75 per cent over bank base rate for life, depending on loan
size. Fixes can also be lower than those on offer from high street banks.
Fees also tend to be much more palatable than those of the mainstream banks,
particularly for such competitive rates. They range from a flat fee of a few
hundred pounds to 1 per cent of the loan amount.”
9. Access is often via a broker. Unless you are already a private banking
client, you need to go through a broker. “Whereas high street banks have
been doing their best to cut brokers out of the picture in recent months,
the opposite is true with the private banks,” Gary Festa says. “They welcome
brokers who can specialise in the higher end of the market.” A broker can
also help to cut a deal on fees. “We had one client borrowing £2 million and
the lender wanted a fee of 1 per cent, or £20,000,” Bien says. “The broker
managed to negotiate the fee down to just £3,000.”
10. Good credit rating is a must. In addition to a large deposit and deep
pockets to cover the fees, you will need to have a good credit rating in
order to get a loan from a private bank. You should also be looking to
borrow at least half a million pounds. “The minimum loan size would probably
be £500,000, with no real maximum, although this will depend on your income
and status,” Bien says.
HFM Columbus
London & Country Mortgages
Savills Private Finance
