The State Bank of India is pushing forward with its plans to expand its retail division here in the UK by entering the mortgage market for the first time.

The bank is beginning with mortgages for landlords, best known as buy-to-let mortgages, with amounts ranging from £50,000 to £1.5 million, and loan to value of ratios of up to 60 per cent. The bank will roll out residential mortgages next year, by which time it plans to add intermediaries such as IFAs and mortgage brokers to its distribution network.

The bank launched the expansion of its consumer banking business in the UK last year, headed by Mr Deepak Ahuja, the former head of NRI Banking for Europe. In the early days the bank had focused on Britain's Indian community, but this time round its target appears more mass market.

“Our target market is all UK property investors, not just the Indian community,” said the bank in a statement.

The bank attributed the timing of its decision to the change in culture: that in the bull market environment of the past, the prudent terms on which the bank was willing to lend would simply not have been competitive.

“We have decided to launch this project now as the mortgage market has changed and our more prudent lending criteria can be competitive,” said the bank. “A 60 per cent LTV buy-to-let would not have been able to compete three-four years ago.”

Britain's mortgage market has undergone dramatic changes over the past few years, with the collapse of banks such as Northern Rock partly blamed on a lax regulatory system, which allowed mortgages of up to 125 per cent, and 100 per cent mortgages to be the norm.

Loan to value ratios have fallen sharply since: falling to an average of 69 per cent in July, according to the Council for Mortgage Lenders (CML). The market remains muted, with lenders remaining wary: the total value of mortgages in July was down 13 per cent on the same period a year before, according to the CML.

Related Topics
comment COMMENT NOW