Demand for large mortgages is growing, writes Phil Whitehouse, head of The Mortgage Alliance (TMA)
Apparently money makes the world go round. If this is true then the mortgage market has certainly seen its world spin a little slower than it has been used to in recent years.
Looking forward there are few signs of any acceleration with gross lending levels for 2011 predicted to stay relatively flat. But there appear to be sectors aside from the more mainstream residential markets that are seeing activity and volumes increase. The short term and buy-to-let markets currently appear to be on the rise and there is also evidence that the large loans market is growing in impetus with high street lenders appearing to be illustrating renewed interest. Indeed, Santander has recently launched a new deal for large mortgages between £1 million and £2 million and there have also been some speculation that Nationwide is planning to increase its large loan offering to £3 million. Whether this is the case or not remains to be seen but any activity by high street lenders is a positive sign for this market.
It was evident post credit crunch that private banks were responsible for the majority of lending at this high level. But some increased movement towards the top end of the housing market appears to have issued high street lenders with renewed confidence to look more favourably upon the larger loans business.
To illustrate this Largemortgageloans.com’s 2010 Million Pound Property report shows that million pound property sales increased by 58% in the past year compared with 2009. The report shows that 7,451 million pound properties were sold in Great Britain, compared with 4,725 in 2009.&’8232&’8232There were large regional differences in Great Britain. Unsurprisingly 89% of the million pound property sales in Britain in 2010 were in Greater London and the South East and Greater London’s share of all million pound property sales in Great Britain has risen to over 60% in 2010.
More surprising maybe, the West Midlands million pound property market seeing a 100% increase in sales from 2009 to 2010 and East Anglia’s sales increasing by 80% in that time. Elmbridge in Surrey has the most million pound property sales outside London, whilst St Albans is the local authority that has seen the greatest percentage increase in million pound property sales from 2009 to 2010. Whilst Kensington & Chelsea has the highest number of million pound property sales by local authority in Great Britain, increasing by over 40% in 2010.
Largemortgageloans.com suggests that a flight to quality has seen international and domestic property purchasers increasing their investment in million pound properties and this trend could signal the recovery of the market as a whole. Let’s hope so and this appears evident in other research, The Investec £Million Plus Property Market Barometer, released in January which says that buyer confidence in the million pounds plus property market remains high among estate agents, developers and mortgage brokers operating in this sector. It revealed that almost three quarters (73%) of those surveyed say that confidence is either high or neutral among those people considering purchasing properties worth £1 million or more.
However, just over a quarter (27%) of those surveyed claim that buyers in the prime property market are concerned about future prospects. They believe that the top three obstacles impacting sales of million pounds plus properties are: a lack of suitable properties, fear of a ‘double dip’ recession and a lack of finance.
None of these obstacles come as any surprise and it’s apparent that clients are continuing to find it difficult to secure mortgages and other personal loans because of the tighter lending criteria still being imposed by many banks. As such, the prospect of dealing with a larger than average mortgage may be even more daunting for some intermediaries.
Fortunately there are good quality specialist large loans brokers still operating – Largemortgageloans.com are incidentally on the TMA panel – whose support could prove invaluable in getting the case through the approval process via the established relationships they have with the relevant lending institutions.
Partnerships such as these will not only enable intermediaries to help win and retain clients but also provide an additional extra revenue stream option. Something we all need to keep our eye out for amidst challenging market conditions.