June 2, 2008 | posted by Pam Atherton in Banking, Mortgages, Store Cards |

High end mortgages are becoming increasingly difficult to source as banks continue to tighten their lending criteria.

Borrowers wanting mortgages of £500,000+ are being squeezed out of the market or having to pay higher rates and fees to secure high value loans.

Abbey has reduced the maximum it will lend to £500,000 (from £7.5m), Intelligent Finance has a new limit of £750,000 and Nationwide and Chelsea have a cut off point of £500,000.

Banks which are still willing to lend £1m or more include Barclays, Halifax, C&G and Bank of Scotland. However, some such as Barclays, will impose a hefty arrangement fee, typically £5,000 per £1m, but Halifax  can charge up to £40,000 for a £2m mortgage.

Mortgage brokers are increasingly advising high net worth clients to go to private banks, such as Bank of Butterfield and Coutts, which will typically charge 1-1.5 per cent over base rate, depending on the individual’s creditworthiness and the loan-to-value. 

An interest rate of 6-6.5 per cent is reasonably competitive in today’s market so this route may be worth investigating. But to become a customer of a private bank, you will need net investable assets of at least £500,000.

Elsewhere, news from the mortgage market doesn’t get any better. Today Bradford & Bingley, the buy to let lender, announced a profits warning, the resignation of its chief executive and the discovery of a mortgage fraud. It is therefore scaling back its rights issue to £250m at a price of around 50p.
The only good news is that US private equity firm, Texas Pacific Group, is taking a £150m stake in B&B.

The fact that such a savvy investor is willing to invest in the ailing bank at this juncture may indicate that it is  calling the bottom of the market for UK mortgage lenders.

Let’s hope so.