Chinese enter the UK loan market to attract high net worth individuals

Lending to property investors in the UK could be given a boost by the arrival of China's third largest commercial lender which is expanding its operation in the British market.

The head of the British unit of the Bank of China said that it is looking to 'cherry pick' the very best customers and sees a great deal of opportunity in the UK because lending from the big banks is not currently meeting demand.

It is seeking 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.

The recession in the UK has provided a golden opportunity according to Xixu Sun, chief retail banking officer at Bank of China UK Ltd. 'Before the financial crisis you didn't have a choice, you couldn't cherry pick the good customers. Now you have that choice because there's a drought in terms or mortgage loans provided by the banks,' he explained.

Others agree that it is a wise move. 'There's a gap, particularly for the high-end market. The big banks have been very restrictive on lending,' said Jaap Meiher, a banking analyst at Evolution Securities in London.

'A new lender coming in is definitely good news for the UK mortgage market which has got more demand than supply. The mortgage market at this point of time generates some decent margins and the risk is pretty minimal at current rates,' said Ray Boulger, a senior technical manager at Charcol, Britain's biggest online mortgage broker.

The Chinese bank has received 1,300 mortgage inquiries in the past two weeks, with 60 loans worth £20 million pounds approved, Sun said. It now has five branches in the UK, two of which are in London.

Those seeking to borrow from the Beijing based bank will need to meet tight criteria and have to attend face-to-face interviews to assess their 'willingness' to repay loans. Its tracker mortgages will be capped at 75% of the value of the property and set at 2.5% above the Bank of England base rate of 0.5%, Sun confirmed.

He hopes that the lending side of the business will increase on par with the bank's other business. It has seen, for example, a 40% increase in deposits in the past 12 months.

The UK home loan market is 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.