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Bank of China, the world’s third largest bank, has started offering mortgages to credit-starved British borrowers at rates that undercut many of the deals available from established UK lenders.
The bank, which has previously focused on Chinese communities in the UK, wants to become a household name alongside lenders such as HSBC and Barclays.
The experience of taking out a Bank of China mortgage will not be quite the same as that offered by the traditional UK lender.
In a nod to Chinese belief in the auspicious nature of the number eight, the bank has had a mortgage arrangement fee of £888, though it this week switched it to the more recognisable figure of £995.
It will insist on meeting each new borrower personally before offering them a loan, and will fund loans from its own capital reserves, a conservative approach that was once the norm in UK banking but fell away in the fervour of the latest housing boom.
Mortgage brokers said its tracker rates ��" available for homeowners and buy-to-let customers and starting at 2.5 per cent above the base rate ��" were among the best on the market and should go some way to relieving the shortage of home loans in the UK.
The bank is beginning its mortgage business slowly, discreetly marketing its rates through four distributors, including Savills and Legal & General Mortgage Club.
Brokers said the emergence of such a large lender was welcome at a time when the mortgage market had suffered a significant contraction of supply.
“We are not saying this is suddenly going to fix the shortage of funding in the UK market, but it should be seen as a positive signal when a bank of this scale is willing to enter the market,” said Mark Harris, managing director of Savills Private Finance, the broker.
The bank is expected to initially lend fairly small amounts but could rapidly expand its loan book. It said there were opportunities to expand by attracting high quality business from the wider UK market.
Analysts believe foreign banks are in a strong position to lend in the UK as they have healthier balance sheets and do not have back books stuffed with high-risk loans.
“The UK is likely to be relatively attractive for overseas lenders who can access funding,” said Robert Law, an analyst at Nomura
Mike
The bank, which has previously focused on Chinese communities in the UK, wants to become a household name alongside lenders such as HSBC and Barclays.
The experience of taking out a Bank of China mortgage will not be quite the same as that offered by the traditional UK lender.
In a nod to Chinese belief in the auspicious nature of the number eight, the bank has had a mortgage arrangement fee of £888, though it this week switched it to the more recognisable figure of £995.
It will insist on meeting each new borrower personally before offering them a loan, and will fund loans from its own capital reserves, a conservative approach that was once the norm in UK banking but fell away in the fervour of the latest housing boom.
Mortgage brokers said its tracker rates ��" available for homeowners and buy-to-let customers and starting at 2.5 per cent above the base rate ��" were among the best on the market and should go some way to relieving the shortage of home loans in the UK.
The bank is beginning its mortgage business slowly, discreetly marketing its rates through four distributors, including Savills and Legal & General Mortgage Club.
Brokers said the emergence of such a large lender was welcome at a time when the mortgage market had suffered a significant contraction of supply.
“We are not saying this is suddenly going to fix the shortage of funding in the UK market, but it should be seen as a positive signal when a bank of this scale is willing to enter the market,” said Mark Harris, managing director of Savills Private Finance, the broker.
The bank is expected to initially lend fairly small amounts but could rapidly expand its loan book. It said there were opportunities to expand by attracting high quality business from the wider UK market.
Analysts believe foreign banks are in a strong position to lend in the UK as they have healthier balance sheets and do not have back books stuffed with high-risk loans.
“The UK is likely to be relatively attractive for overseas lenders who can access funding,” said Robert Law, an analyst at Nomura
Mike