Expert looks at why more and more mortgages over £1 million are being requested
High property prices, low-interest rates in recent years, investment opportunities, and foreign investment have all left their mark on the UK market.
Vanessa Hunt (pictured), key account manager at Harpenden Building Society, said this combination of factors had contributed to a rise in demand for UK mortgages over £1 million and, in turn, created significant opportunities for brokers.
Uptick in demand for large loans
Hunt said the UK had one of the highest average property prices in the world, especially in London and the South East. As a result, she added, many buyers often required large mortgages to afford the properties they wanted to purchase and the low-interest rate environment of recent years had made it easier for high-net-worth individuals to access larger mortgage loans.
“This has led to many buyers taking advantage of historically low rates to secure large mortgages, a scenario continuing today, to some extent, despite recent rises,” she said.
Hunt said high-net-worth individuals saw property investment as an attractive way to diversify their portfolios and achieve long-term financial growth.
“Mortgages can provide a way to access property investment opportunities that would otherwise be out of reach,” Hunt explained.
Meanwhile, foreign investment had seen many international buyers viewing the UK property market as a safe haven for their investments. As such, she said they were willing to pay high prices and take out large mortgages to secure a place in the UK property market.
Catering to high-net-worth needs
According to research by estate agency Savills, 41,223 new housing millionaires were created in 2022, a rise of 6% in a year, and overall, Hunt said the popularity of £1 million-plus mortgages had had a significant impact on the UK mortgage industry, driving innovation and competition among lenders, while emphasising the need for robust regulatory scrutiny.
One of the main impacts of this trend, Hunt said, was that lenders had adjusted their lending criteria to accommodate the needs of high-net-worth borrowers.
Simon Cockerill, group head of intermediary sales development at OSB Group said: “Within OSB Group, we have a dedicated high-net-worth team made up of client account managers who work alongside these clients all year round, which involves forward planning as much as possible.”
Cockerill added that this helped avoid any need for urgency as the preparation had already been done in advance.
The group’s high-net-worth clients were professional landlords who run their portfolios as businesses, so Cockerill said considerations such as capital raising and maintenance planning had already been built into their business plans.
“All of our high-net-worth clients are given a dedicated account manager who works alongside the broker,” Cockerill said.
As a team, Cockerill said, the firm held regular reviews where it discussed planning ahead for potential product retention, identifying new borrowing, considering potential legislation coming down the track, as well as looking at market changes and what this might mean to the client and the broker.
Market outlook
Looking at the development and trends of the high-net-worth market, Cockerill said it was difficult to provide a definitive answer as every client had differing needs.
“Some of our high-net-worth clients are looking at shorter-term fixed rates, not wanting to lock-in to a deal for too long given the current market conditions, but others were still choosing the security of standard five-year fixes,” he said.
Cockerill had also witnessed some bigger borrowers looking to expand and wanting the flexibility to move quickly. It was a very mixed picture, he added.
Have you seen rising demand in the large loans section of the mortgage market? Let us know in the comment section below.
