Million pound mortgages are cheaper than ever

Loans of up to £5m offer rates less than 1 per cent

by: James Pickford

Getting a mortgage for more than £1m is cheaper than ever, as banks cut fees and tempt wealthy buyers with interest rates below 1 per cent.

Following the Bank of England’s quarter-point cut in base rates in August, competition between high street banks in the lucrative “large loan” market has intensified.

Bigger mortgages are typically charged at higher interest rates than standard home loans, but the difference has narrowed in recent months as banks jostle to sign up borrowers for the supersized loans than will more easily help them meet their annual lending targets. The definition of a large loan varies according to lender, with some setting the floor at £500,000 and others at £1m.

“Lenders are really pushing for large loans at the moment. They’re constantly undercutting each other,” said Aaron Strutt, product manager at broker Trinity Financial.

Those looking to borrow up to £5m could obtain an interest rate under 1 per cent in the best deals for a two-year fix — the lowest large loan rates brokers said they had ever seen.

Yorkshire building society on Friday announced a two-year discounted variable mortgage at 0.98 per cent on home loans up to £5m. It carries a fee of £1,495 on loans up to a maximum 65 per cent of the property’s value.

HSBC offers a two-year fixed-rate deal at 1.09 per cent for those with a deposit of at least 40 per cent, and will lend up to £5m. Its five-year fixed rate deal runs at 1.99 per cent.

This month, Barclays reduced its two-year fixed rate from 1.85 per cent to 1.49 per cent for mortgages between £1m and £3m. In promoting its deals to brokers, the bank said £38bn of loans would be ripe for remortgaging in the last three months of 2016.

Last month, Santander cut the rate on its five-year fix by half a percentage point to 2.09 per cent for mortgages between £250,000 and £3m. Coutts, the private bank, has recently lowered its rates by up to 1 percentage point on loans over £5m.

Other incentives are also being offered to entice well-heeled borrowers. Barclays
are offering free valuations to anyone buying a home
worth up to £2m and TSB
has removed mortgage application fees from its mortgage range, including large loans.

Copyright The Financial Times Limited 2016. All rights reserved.