Mortgages over £1m are on course for extinction, and the few remaining deals charge crippling fees, according to HFM Columbus.
However, private banks are likely to step into the fore, allowing high net worth clients to purchase expensive properties.
HFM Columbus says many lenders will offer mortgages of up to £1m, but just one pound over this amount and the options available to borrowers become very limited.
“Assuming you can find a lender prepared to arrange a loan in excess of £1m – and we are talking about barely a handful – the fees become crippling, even for those with up to 50% loan to equity,” explains Gary Festa, director at HFM Columbus.
“Barclays, traditionally a major player in this high net worth mortgage arena, imposes a huge £5,000 arrangement fee for a £1m plus mortgage - and adds an extra £5,000 to every extra million borrowed. In addition, it increases its rates over the first million and again for every additional one,”
Festa says buyers at the top end of the market are even more limited, with just four lenders offering mortgages of over £5m.
However, Festa says private banks are likely to become an attractive option for wealthy buyers and says mortgage brokers are well placed to help clients.
“Private lenders rarely looked attractive in the past, but now many of them are looking very attractive against the limited retail offering. The difference of course is that rates and fees are individually negotiated, which is where mortgage broker expertise comes in,” he says.
Private banks are looking to expand their mortgage business, according to HFM Columbus, and many are now considering offset arrangements for high net worth clients.
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