The difference between High Street and Private Bank lending

High Street Lending

Lending in this sector is now approaching pre-crunch levels. Lenders who had effectively left the market by setting their rates and fees to unattractive levels are now back and competing with each other. This has led to a surge in extremely cheap 2 and 5 year fixed rates, now available at improved loan to values with reasonable fees.

Larger loans are now also possible with a few of the major players prepared to lend up to 2m at high street rates and charges, with lending over 3m available but attracting a slight premium.

Example deal: 1.49% 2 year fixed rate to 65%, max loan 2m, max 50% interest only. 1999 fee added to loan. Main Residence only.

When assessing the size of a loan available to an applicant most lenders are now moving away from straightforward income multiples and towards affordability calculators. In practice multiples of up to 6 times income are still achievable but major outgoings, such as school fees, can reduce these drastically downwards.

Private Bank Lending

Increased competition from the high street has also led to loosening of criteria. Until recently the private banks had the 2m plus lending sector to themselves and were able to dictate terms. In practice this meant that it lending was conditional up a client investing a significant sum with the lender.

Whilst many lenders still insist upon this there have been a few lenders who have broken ranks and are now offering loans with no investment conditions.

Example deal: 2.5% over 3 month Libor, 1% arrangement fee, 5 year term. Interest only with no redemption penalties.

This may not appear as immediately attractive as a high street option but private banks are far more flexible than the high street and can consider options such as:

  • Lending to trusts, SPVs and companies
  • Lending offshore
  • Flexible criteria on income assessment for individuals with complicated income scenarios
  • Foreign nationals
  • Large interest only loans at up to 65% Loan to value.

Rates as low as 0.65% over 3 month Libor (which as of today stands at 0.52%) are still available for those with funds to invest and to offer as security.

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This post was written by CBJ

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