The number of £5million-plus mortgages in the UK has jumped by nearly two-thirds as the super-rich took advantage of low-interest rates, new research has revealed. Figures from the Financial Conduct Authority (FCA) show the number of property sales with mortgage loan values of more than £5m lept from 169 in 2020 to 279 last year – a 65% increase.
Meanwhile, loans to buy properties costing more than £10m almost doubled, rising from 40 in 2020 – at the height of the Covid pandemic – to 72 in 2021. The average value of the £5m-plus mortgages was £9.5m in 2021, up from £8.9m year on year, and the total value last year was £2.7billion, an increase of £1.1bn from 2020.
It will be no surprise that the vast majority of this megabucks real estate is in and around London. Last year 220 mortgage loans of £5m-plus were secured on properties in Central and Greater London, compared with 49 in the other regions and 10 that were classified by the FCA as “unknown”.
In 2020 the London figure was 142, with 15 elsewhere in the UK and 12 unknowns. Terry Fisher, from leading property buying service We Buy Any Home who obtained the data via a Freedom of Information (FOI) request, says the mortgage loan rates on offer for those paying millions make property a very attractive investment.
He explained: “While most people who are borrowing between £200,000 and £300,000 will be offered mortgage rates of around three to four per cent, those financing deals for prime and super prime properties will get much lower rates of around one per cent. And because property is one of the rare assets you can borrow against, unlike stocks and shares, it means for a smaller initial sum you can secure a much larger loan and then leverage it against other financial deals and interests.”
The Bank of England has raised interest rates six times to the current level of 1.75%, with experts predicting it will soar to more than 4% next year. That will be bad news for those on fixed term mortgages coming to an end, with a high of 4.4% widely estimated before the possibility of a fall in 2024.
We Buy Any Home’s Mr Fisher added: “These FCA figures will make grim reading for those struggling to get on the housing ladder at all. Property prices increased by around 10 per cent over the past two years, with the global health pandemic sparking the so-called ‘race for space’.
“And while the current cost of living crisis and forthcoming recession could see prices fall, there is still a shortage of properties such as family homes with outdoor space. Even if prices do fall, increasing expenses elsewhere mean many first-time buyers will still be left out in the cold.”
