Interesting news this week has arrived from the mysterious east. It has been announced that Bank of China Ltd. (BoC), one of the largest Chinese banks, has plans to expand into the British residential property lending market.

The bank previously had no opportunity to expand into the UK as it didn’t have a competitive advantage in the saturated market. However, these days, the lending terms of most UK banks are very strict, which gives foreign banks a clear advantage.

 The state owned BoC, the country’s 3rd largest bank, intends to win the loyalty of British prime-customers, people with good or excellent credit history, who still have a hard time getting a mortgage from British lenders.  

Previously, BoC’s business in the UK was targeted at the ethnic Chinese community; however, it now plans to expand its assets beyond that. BoC’s mortgage products will now be available through 4 mortgage distributors and 15,000 mortgage brokers in the UK. 

The wider reach of the BoC is hoped to move beyond its traditional ethnic Chinese customer base and attract business from high net worth individuals and professionals such as investment bankers, doctors and accountants who have good credit histories but are still struggling to get loans from Britain’s traditional lenders. 

This tactic is known as cherry picking the best customers who needs are not being served in the current market conditions. 

Currently, the Bank of China Ltd. has 5 branch offices in Great Britain with 2 located in London. All mortgage applicants will have to go through an in person interview before their application gets approved. The bank admits that the sum of deposit required has significantly grown during the past year.

UK mortgage brokers warmly welcomed the expansion of the Bank of China as, according to the latest data, demand for mortgage in the United Kingdom exceeds the supply.

BoC says it has received 1,300 mortgage inquiries in the past two weeks, with 60 loans worth £20 million pounds approved. Its tracker mortgages are capped at 75% of the value of the property and set at 2.5% above the Bank of England base rate of 0.5%. 

The UK home loan market is currently dominated by six lenders: Lloyds, Santander, Nationwide, Barclays, Royal Bank of Scotland, and HSBC which account for 78% of lending, according to the Council of Mortgage Lenders.

This entry was posted on Tuesday, September 1st, 2009 at 7:36 pm and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.