Harpal Singh, managing director of Conveyancing Alliance Ltd, is buoyed by Bank of China’s UK lending plans.
Looking at the UK lending landscape one can’t help think it resembles the ‘space’ between the Earth and the moon at present – in the past a number of organisations spent a lot of money getting out there but now it seems no-one has the money or inclination to make the journey again. Instead we have the usual suspects up there ‘doing the business’ with, at least until recently, the chances of anyone joining them seeming particularly remote
Now of course, with this being the 40th anniversary of man setting foot on the moon, there is much talk about the next phase of space exploration and which countries (if any) will be the next to join the usual suspects of the Americans and the Russians.
In the UK lending market, there is also plenty of chatter about the need to have new entrants ‘going boldly’ into the market to give the industry a much-needed boost and rather crucially push increased mortgage funding out to borrowers. Lately, with the wholesale markets still closed, the chances of seeing new entrants seemed about as likely as putting a man on Mars let alone going back to the moon again
Now, however, as in space exploration it would seem that countries such as China and India could be leading the way. In lending circles at least there are also rumours about some significant potential Middle Eastern forays into the UK. The Chinese however are certainly here with Bank of China willing to distribute through intermediaries which is welcome news for everyone. The other second bit of good news is that they are not just operating in the mainstream market with buy-to-let products also available
The four distributors offering Bank of China products have recently been revealed as Complete, Solent, Connect and Savills Lending Solutions and the products are the equivalent of direct to lender deals but offered through the intermediary market. Good news again in terms of the product rates and intermediary access to them
As an aside, it is good to see a lender recognising the strength of the UK intermediary sector and the service it provides. Latest figures from the CML show that 64% of total lending in Q1 this year came through the intermediary channel, while a whopping 70% of first-time buyers purchased their mortgage via an adviser in the same period. This shows that even in this depressed market, borrowers still want to use the expertise of a qualified, professional adviser – perhaps lenders would now like to reflect this in their product availability and let intermediaries access the best priced deals rather than keeping them all for their direct channels
Clearly, Bank of China is able to conduct its lending through its balance sheet and, while the wholesale markets are in stasis, any new lenders coming into the UK are also going to have to operate in this manner. Therefore, it seems rather unlikely that our American cousins will be following Bank of China anytime soon, indeed, it is more likely that Indian or Middle Eastern organisations will be the next to follow suit
While at present Bank of China may be a lone new entrant it is unlikely to be the first and last. Many other lending institutions will surmise that if Bank of China feels it can make it’s lending profitable in the UK, then why can’t they? Particularly if their balance sheets are untarnished by historical toxic debt. As we see the arrival of more entrants we could see some sustainable competition for our UK banks. Even with the pressures put on them by their new public owners, they may have to react to any new ‘predatory’ banks. So this could be the start of a truly functioning mortgage market with competition amongst lenders, resulting in increasing LTVs, better pricing and maybe even some loosening of criteria
At the very least, it is pleasing to see a new lender providing consumers with more choice. Let us hope that this is the start of increased competition with prospective lenders gaining the confidence to rocket their propositions into the market in the months ahead.