Bank of China starts to offer mortgages in the UK
Published ¤ 27/07/2009
Bank of China has begun offering mortgages to British borrowers, who are finding it difficult to get loans from leading UK lenders. The worlds third-largest bank is lending at lower rates than many of the deals available from more established UK lenders. It has previously focused on lending to the Chinese community within the UK
With rates from 2.5 per cent over base, it is targeting homeowners and buy-to-let landlords who are struggling to get credit. It is marketing deals via four brokers, including PKS, Savills and Legal & General Mortgage Club.
Bank of China's approach will differ in several ways from its British peers. It will insist in meeting each borrower face-to-face before deciding to offer a loan, and will fund them from its own capital reserves, a more conservative approach than that of many UK lenders in the years of the housing boom.
Although home loans jumped 17 per cent in June, with gross mortgage lending at a six-month high of £12.3 billion, from May's £10.5 billion, the CML says it is 48 per cent down on June 2008.
Borrowers are facing a dearth of choice as many UK lenders have reduced their mortgage deals in the past few months as the Bank of England interest rate has stayed at an historic low of 0.5 per cent. The cost of the average two-year fixed mortgage deal has risen from 4.66 per cent to 5.08 per cent in the past month, according to moneyfacts.co.uk. Moneysupermarket.com, the comparison site, said that just 2,282 deals were listed this month, against 27,962 two years ago at the height of the boom.
The emergence of a new big lender could help to stimulate market supply and may encourage other lenders, some backed by the state, to introduce more competitive rates. Mark Harris, managing director of Savills Private Finance, the broker, said: "We are not saying this is suddenly going to fix the shortage of funding, but it should be seen as a positive signal when a bank of this size is willing to enter the market."
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