May 7th, 2008
Jumbo Lending Packages Come Off The Table
Mortgage lending is contracting at an alarming rate as availability of funds remains tight and lenders continue to cherry-pick the safer risks, squeezing out the high loan-to-value (LTV) borrowers and first-time buyers.
Figures from the British Bankers’ Association illustrate just how badly the Bank of England’s rescue facility for mortgage lenders is needed. The total value of mortgages for house purchase, which now account for just 27% of all new home loans, was 46% lower than in March last year.
During March only 35,417 new mortgages for house purchase were approved – 18% lower than in February and at a time of year when the market would normally be picking up. Lending is now at its lowest since September 1997.
But is the shortage of funds affecting wealthier clients and the top end of the market? Are mortgage lenders – anxious to spread their money as widely as possible to keep the housing market moving – cutting back on jumbo mortgages?
Lending Manufactured ‘It’s already happening,’ says Melanie Bien of mortgage broker Savills Private Finance, which deals almost exclusively with high-net-worth borrowers. ‘A number of lenders have already reduced their maximum loan to ￡500,000 and there is much less choice. Clients are coming to us, unable to get loans of 85% because most lenders have cut back to a maximum of 75% or 80% LTV.’
Halifax recently reduced its maximum to ￡500,000 although borrowers can go within the Bank of Scotland group for larger loans. Abbey‘s Flexi Plus range has reduced loan limits to either ￡300,000 or ￡550,000. ‘You used to be able to get loans from Abbey up to ￡7.5 million,’ Bien points out.
Woolwich has imposed a ￡1 million maximum on selected products since the middle of February, down from ￡2 million, although Woolwich does offer an alternative for loans of more than ￡1 million – at higher rates.
‘The main high street lenders offering large loans of ￡500,000 plus are Abbey, Lloyds TSB, Woolwich, Bank of Scotland and Clydesdale. The private banks, such as Coutts, Citi, Singers etc, are also worth considering although you will need to access these through a broker with contacts there if you don’t already have a relationship with them through a bank account,’ says Bien.
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