Private banks offering good lending rates for wealthy UK property buyers, search company has found

News - Banking

Written by Ray Clancy

Wednesday, 24 November 2010 10:13

Private banks have become a dominant force in the prime residential property market in London targeting wealthy, asset rich borrowers to establish long term relationships with them, it is claimed.

London property search company, Sourcing Property, has found that they are offering very good lending rates to new and existing clients who meet their client criteria. ‘We’ve noticed this with our own clients, of which approximately 75% buy with a mortgage. Those clients with relationships with their banks are getting finance much more easily and quickly than those who have shopped around and chosen a lender who they have no relationship with. In this market, it seems that being a private banking client does have significant benefits,’ said Jo Eccles, director of the company.

Looking ahead to 2011 finance is still expected to be in short supply versus previous market conditions but Eccles believes that borrowing will still be available to those with a cash deposit of 30% or more. ‘However, certain types of property, such as those above food serving commercial premises, will be unobtainable to many buyers requiring a mortgage,’ she said.

Wealthy buyers are also looking to invest in property because of concerns about inflation. ‘A lot of our city professional buyers, including bankers, have voiced concerns over inflation risk over the next few years, and as a result many are keen to put their money into the housing market to protect the value of their cash, whether as a buy to let investment or a home to live in themselves,’ explained Eccles.

She also believes that a two tier system has emerged where the top 10% of properties are expected to outperform the rest of the market. ‘Blue chip' properties are still commanding peak prices and selling quickly. Whereas second rate properties, those with some flaw whether that be location, lower ground, a walk up etc’ are taking much longer to sell,’ said Eccles.

The company has also found that a lot of properties coming to the market have a short lease, which suggests that ‘old money’ home owners who have owned for a long time or inherited property, don’t have the cash funds or access to borrowing to extend the leases.

‘Whilst mid term leases of 60 to 70 years are traditionally common in areas such as Chelsea, Belgravia, Mayfair and Marylebone, we’ve encountered a number in areas such as Shepherds Bush and Clapham, which is quite unusual,’ she said.

‘Short leases provide a source of good quality properties for cash buyers not requiring a mortgage, as most lenders are refusing to lend on properties below 55 years. These buyers can then apply for a lease extension once they own the property,’ she added.

A lot of properties are being marketed ‘quietly’, rather than on the open market and Eccles expects this discreet way of selling to continue. ‘We would suggest an air of caution with off market property, however, as in some cases, this is simply a way of estate agents creating an air of exclusivity and a premium price for a property when it’s not always warranted,’ she warned.

The lack of supply of good quality property is likely to continue into 2011 as existing home owners take advantage of low interest rates and hold onto the property they own. ‘With interest rates stable and widely expected to remain low throughout 2011, it's difficult to see any major factor which could cause a flood of new property onto the market,’ said Eccles.