Bonus mortgages in focus
Despite ongoing market volatility, Investec has launched a mortgage specifically for city workers with large bonuses. Adam Saville finds out more
While the economic outlook is one of doom and gloom for most of us, Investec Private Bank has still seen fit to unveil a mortgage aimed at wealthy city workers. Targeting those who earn over £300,000, looking for a mortgage of £500,000 or more, the scheme allows the borrower to make smaller monthly payments in line with their basic salaries and then make up the difference with one larger interest payment conveniently timed to be at the same time as their yearly bonus.
It’s no surprise that such a scheme has been launched in February, around the time that lucrative bonuses are often handed out. Large loans for high-flying city workers of a similar scale are not rare and these sorts of bonus mortgage concepts were commonplace at a time when the economic climate was more stable, such as when Woolwich launched the ‘City Bonus’ deal 18 months ago.
Elizabeth Holloway, spokesperson for Woolwich, says: “There are no plans at present to relaunch, or for a similar product, but this version is still available.
“These sorts of mortgages are based on affordability. A lot of the applicants will have a good credit rating, and their income will still be reliable. However, such a package is not something we are too preoccupied with at the moment.”
With the credit crunch placing added strain on some major companies, and controversy surrounding bonuses in such a climate, the reluctance of some lenders to focus on this market is understandable. Some have struggled to recompense key talent with the usual hefty sums, and some have had to let staff down by either paying badly or, in the worse cases, laying them off. Given this, the launch of Investec’s scheme, which relies on an individual’s annual bonus, could appear oddly timed.
Melanie Bien, spokesperson for Savills, recognizes the unpredictability of the market at present. “Many people will still receive a very good bonus and a lot can be based on their track record,” she says. “Lots of people had a good time of things last year, but it is questionable whether such success will be repeated again this year. Also, a lot of stock market traders have slowed down and what remains to be seen is whether liquidity will return.”
Despite this turbulence, Investec still believes that as many as 3,500 people working in the City alone could receive bonuses of over £1m this year.
Wayne Preston, spokesperson for Investec Private Bank, says: “Our research shows that there are over 104,000 people in the UK with an annual income of at least £200,000, and many of them will receive substantial bonuses. If they can provide strong evidence of the type of bonus they can expect, we are prepared to develop a loan for them that takes this into account.”
Investec looks at the track record of the client, with an aim to offer them a long-term mortgage, which mixes the discipline of making monthly payments coupled with the flexibility of the annual payment at bonus time. Preston says the success of the mortgage will rely on strong risk management, and flexibility around the needs of the client.
So, for those lucky few still set to receive a bonus this year, this type of mortgage could be right up their street. The rest of us will have to make do with the normal, everyday variety – fortunately there are still plenty of those around too.
Tags: mortgage, Mortgage rates, mortgages, News, property
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