“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 of mortgage loans provided by banks’.

Xixi Sun, head of Bank of China’s UK operations, recently announced on Bloomberg the third largest Chinese bank’s plans to expand onto British residential lending market.

Mr Sun’s London unit previously targeted the ethnic Chinese community. However the very strict lending terms of most UK Banks provide the Bank of China with a golden opportunity to capitalise on the low levels of approved mortgages in the high-end market. Bank of China thus intends to expand its asset worth £7 billion beyond that and win the fidelity of the British customers with good or excellent credit history who have difficulties in obtaining a mortgage from British lenders.

Mr Sun added that Bank of China’s mortgage products would be available through 4 distributors, including Savills and Legal & General Mortgage Club as well as Bank of China’s five British branches.

UK mortgage brokers have warmly welcomed the bank’s statement as the latest data suggests that demand for mortgages in the UK exceeds the supply.

Two facts are noteworthy:
Firstly, unlike most banks, Bank of China will use its own capital reserves to lend to its customers, rather than by borrowing money from the wholesale markets.
Secondly, customers will only be able to borrow up to three times their salary and will have to go through an interview as part of their mortgage application. The latter suggests a u-turn from automated credit scoring and centralised methods of underwriting of risk, which had become predominant during the boom years and may signal a return to more traditional methods, based more on personal relationships and knowledge.