Foreign banks seek British borrowers

Foreign banks, which have already shaken up the UK savings market, are offering mortgage rates as low as 2.5 per cent to British homeowners. Bank of China, Israel’s Bank Leumi and Handelsbanken of Sweden are among the lenders targeting borrowers in the UK.

Are the mortgages any good?

Bank of China has a lifetime tracker mortgage at 2.5 per cent over the 0.5 per cent base rate, while Bank Leumi has been offering a five-year tracker charging 1.625 per cent over the Libor interbank lending rate - equivalent to a starting rate of about 2.5 per cent.

Bank of China, which wants to become a household UK lender, is also offering buy-to-let tracker mortgages at 3.5 per cent over base rate, which brokers say require lower rental cover than rivals.

Handelsbanken is reportedly offering £1 million-plus mortgages at a time when many lenders are capping their best rates at £250,000.

As with many UK lenders, borrowers are likely to need substantial deposits or equity. The foreign lenders also charge up front fees - from £995 in the case of Bank of China.

Are there any risks?

There’s no need to worry about exchange rates as these mortgages are in sterling. And while savers have had concerns about Icelandic and other foreign banks in the credit crisis, remember that with a mortgage the bank has lent you money, so it’s the one taking the risk.