Hugh Wade-Jones is director of Enness Private Clients
The past few weeks may have seen our proud nation boast about what we do best with the BRIT Awards coming hard on the heels of London Fashion Week and the BAFTAS, but when it comes to certain markets, Johnny Foreigner (for want of a better phrase) appear to be streets ahead.
This is certainly the case in the high net-worth mortgage market where foreign banks are stealing a march on their British counterparts.
When you factor in that foreign investors are now accounting for 63% of purchases in the prime London new-build residential market and 88% of properties over £5m according to Savills, it becomes clear that the high net-worth market is something of a Brit-free zone at present.
With UK high-street lenders yet to fully regain their appetite and often struggling to source funding lines, it is inevitable that overseas and private banks would look to plug that gap.
While institutions like Bank of China and State Bank of India have grabbed the headlines for their forays into the mainstream market, lenders such as Africa’s First National Bank, Asia’s OCBC and Scandinavia’s SEB have flown under the radar of the press but are making a difference to high net-worth brokers in their day-to-day dealings.
At the present moment it is not unduly concerning that the high net-worth market is being dominated by foreign money as it is helping keep the market buoyant, although it is to be hoped that UK lenders can start edging back into proceedings once the economic climate warms up.
An interesting footnote to the overseas invasion is that some foreign lenders have advised their underwriting staff to concentrate their lending efforts on UK natives rather than borrowers of their own nationality to prevent too much money being taken out of their country of origin. It’s not likely to have a massive effect either way, but it is nevertheless a noteworthy strategy.
One thing that a number of the overseas and private banks we deal with do have in their favour is a flexible underwriting approach. I’m not really a fan of tick-box lending across the board but I’m particularly against it when it comes to high net-worth individuals where their circumstances and finances are often complex.
The very fact the Financial Services Authority wants to class high net-worth borrowers as those earning in excess of £1m and the outcry surrounding the fact that the Mortgage Market Review suggested that some wealthier individuals may be exempt from usual advice procedures, shows that there is an inherent misunderstanding of our corner of the market.
We would classify high net-worth individuals as those earning closer to half a million or even those taking home a more modest salary than that but supplementing their income through bonuses, investments or other financial considerations.
And there’s the rub with high net-worth mortgage broking – it’s not cut and dried and each individual case needs to be assessed on its own merits. For as long as overseas banks acknowledge this fact and accept cases accordingly, then they are going to continue to squeeze out their British peers.
Lending competition seems to be returning to all levels of the market with an influx of new entrants, so let’s hope that our own lenders use the opportunity to raise their game.
