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Street wise

Clients wanting big loans need a broker who knows their way around both high-street lenders and private banks

Obtaining big loans on the high street has been more difficult since the downturn as lenders have generally had less to lend, so it is encour-aging that the situation is easing this year, with Nationwide the latest high-street lender to announce a serious proposition for those looking to borrow up to £2m by increasing its maximum loan available.

People with a 30 per cent deposit can access rates including a five-year fix at 4.49 per cent and a twoyear tracker at 2.49 per cent over base rate, giving a pay rate of 2.99 per cent. It is a pretty impressive offering.

However, the fact that these products have no fee suggests a lack of understanding of the top end of the market on Nationwide’s part.

To compensate for charging no fee, Nationwide is, of course, increasing its margin on the rate. While that may be reasonable, as the lender has to make money, clients borrowing these sums tend not to be so concerned about an up-front fee as they are about the rate. Most borrowers looking for a £1m-plus loan would rather have as low a rate as possible and pay a higher fee.

Fees aside, the private banks are increasingly being given a run for their money but they still dominate this section of the market. They understand big loans better and offer tailored products and bespoke underwriting. They are often criticised for insisting on wealth management opportunities as a condition of the ongoing facility but they want to be more than just a lender. Of course, the broker who introduced them in the first place does run the risk of being left out further down the line.

The need for advice is important in this already complex area, particularly if the high street is touting for business. The risk of making a mistake and picking the wrong deal is greater than ever

However, despite a few downsides, the private banks understand people requiring big loans better than their high-street equivalents. This became painfully apparent when Halifax cut its maximum loan to value on interest-only loans to 75 per cent. Yes, this brings Halifax into line with the rest of the market but since when did one size fit all when it comes to mortgages?

I mentioned Halifax’s decision on Twitter and was immediately tweeted by someone who works at one of the private banks. He said surely it depended on the size of the mortgage. With bigger loans, interest-only makes sense, especially for those in receipt of sizeable bonuses who can chip away at the capital. He said he had never agreed a £1m-plus loan on a capital and repayment basis because that was not what borrowers wanted.

This highlights the other issue with high-street lenders – that complex income streams are not understood as well as they are by the private banks.

There are limitations on both sides. The important thing for clients is that they get exposure to all that is on offer, particularly if they are borrowing sizeable amounts of money. This is where an independent broker with excellent contacts at both the private banks and high-street lenders comes in, someone who knows where to go and which lender will suit that client’s circumstances.

The need for advice is imp-ortant in this already complex area, particularly if the high street is touting for business. The risk of making a mistake and picking the wrong deal is greater than ever.

It may be that a compromise is the best solution – that a private banking arm of a high-street bank offers the best of both worlds. But how would a client know that unless they had a good broker advising them?

Melanie Bien is a director of Private Finance

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