Mortgages and the Wealthy
Many of the Banks in the UK have been tightening up the reins on how they will lend money and who they will lend money to. Many of the banks in Britain and the building societies have decided that the wealthy will also be affected by the present situations. It seems that the borrowers applying for “millionaire mortgages” may not be able to get what they are looking for with the new lending practices. There are two banks that are seeing an opportunity, Investec and Abbey. They have decided to forgo the trend of changing the policy and have been more lenient in their policies regarding these mortgages.
The experts in the economy are looking at the credit crunch and how the UK and other European countries have dealt with the changes. Many of the lenders have been unwilling to offer high end mortgages to individuals because of the base salaries they are seeing. It seems even with 1 million pound bonuses the mortgages are being withheld because the lenders feel strict regulations must be in place to avoid the complete fiasco that the US has just experienced in the last year. With only two mortgage lenders left they will be able to have better revenue for the higher end mortgages in the next few months.
Refusal of Credit
The refusal of credit is happening with many banks, even on high end mortgages. The refusal of lending money even to the high end stems from the income of the individual or individuals trying to obtain the loan. The applications that are asking for three times the earnings are being rejected. These loans are also being rejected for any loan to value that is at or above the 95% mark. This means that lenders are unwilling to loan any money if the value on the house and the loan amount are not different enough. Andrew Montlake is a broker with Cobalt Capital who said that there is no doubt as to the actions taking place. He believes that the lenders are being more prudent in the regulations for borrowing, even in the high money loans to prevent any issues later on. The borrowers, even in the high end, are trying to stretch their income, and as the credit crunch has shown this leads to danger for the lending companies.
There are more questions being asked at the underwriting stage regarding the borrowing amounts and the loan set up to avoid the pitfalls that have come before. It seems the investment banker is even being asked about their salaries and bonuses to find out whether the loan can be awarded.
Price Growth for Property Has Slowed
Citigroup is showing a slow in the price growth for property in a recent study. In fact they are seeing that the price increases have slowed to 12% since last August. While these last six months have been difficult these recent price changes will continue to affect the banks and therefore the loans that can be obtained. The tighter lending practices are part of the problem. Many individuals don’t have the savings to support a lower loan to value, which means that they are unable to get the loan. This in turn reduces the housing prices as the owners need to sell.
Investec Private Bank is seeing the gap in the market widen. Since Investec is seeing this widening gap they offered a promotion in the mortgage department. This promotion was designed for city workers who earn at least 300,000 pounds. The promotion doesn’t look at the bonuses that these workers usually get, but instead just concentrates on the base income for these workers. The promotion is designed to entice the workers into buying homes and to help stabilize the market. The bank is basing this promotion on research that was just completed on more than 100,000 people.
The Bonus Promotion
Investec is just one of two banks looking at how the market is changing and they are seeing a widening in mortgage options. It seems many of the banks have decided to forgo offering loans even to those who make more than 200,000 pounds a year based on the type of mortgage and loan to value that would be needed. In a study Investec found a promotion offer that would perhaps help the bank continue making a better revenue in the months to come. They are prepared to offer a loan to anyone who can show an income of 200,000 pounds as well as bonuses that they will earn in the year. If there is documentation for the bonuses the company is going to establish a loan for the individual. They are also going to offer different rates based on the borrower. The rates will depend on the income earned and the size of the loan.
The rates are not going to be competitive in the main stream mortgages. This means that the interest rates may not be based on the Bank of England and could be even higher. It all of course depends on the borrower. This promotion is offered only to a certain spread of individuals as well.
Abbey Mortgages Taking Advantage
Abbey Mortgages like Investec are seeing options in the mortgage industry for higher end mortgages, since many of the banks are beginning to restrict even the higher end mortgages. Abbey pushed for 3 million pounds to be released in mortgages last week, with the opening that they have seen. IN other words they are seeing that 25 brokers will be able to talk directly to the underwriters to allow for these higher end mortgages. It is opening the door for the high end borrowers to get the mortgages that they need.
Abbey is also unleashing 500,000 to 3 million pound mortgages in the market. These mortgages are going to be given to special borrowers in the next five days. So any applications the bank has at the moment could be approved if the right criteria are found for this range of mortgages. The rate is going to be 5.19% for a two year fixed. The loan to value on these promotional loans must be 75%, and the arrangement fee is going to be 3000 pounds for the 3 million pound mortgages. The rate really is the important aspect of the loans, it is having the service when other banks have restricted these options.