bankofchina.gifSalvation could be at hand for UK borrowers desperate to get back on the property ladder in the shape of Bank of China which, amazingly, believes now is a good time to enter the UK mortgage market.

The credit crunch has taken a huge toll on the UK's once-buoyant housing market and caused lenders to sharply reduce the flow of money that kept the bubble inflated for so long.

Bank of China's entry into the UK market is interesting because its lending approach is much more conservative than that of the British lenders, some of whom have had to be bailed out by the UK goverment which is now left holding hefty stakes.

BoC wants a minimum deposit of 25% from its borrowers, will perform tough credit checks and will insist on meeting each borrower face-to-face before deciding to offer a loan. In return for the tough conditions, BoC will lend at lower rates than on offer from many of its rivals.

It will also fund its mortgages from its own reserves rather than from the interbank markets. Such traditional lending practices just two years ago would have British banks laughing their heads off at the quaintness of the Chinese model.

But after the collapse of Northern Rock, which leveraged up to the hilt in the money markets, banks have belatedly realised that borrowing short and lending long can be a recipe for disaster.

Once upon a time, British borrowers might have balked at the idea of borrowing money from a bank owned by the Chinese goverment. But the UK financial services market has gone through a revolution in the past decade with a confusion of channels, exotic business models and new market entrants.

At the height of the boom, many British consumers — and many of the country's local councils — were wooed by high interest rates to put funds into Icelandic banks that had no UK presence apart from a web page and whose names they could not even pronounce.

Iceland's government had to bail out its irresponsible banks and the country is still nursing the hangover from those crazy times.

So too are many UK borrowers, but the decision of BoC to enter the mortgage market now has been taken by some observers as an encouraging sign that conditions may getting back to some semblance of normality.

At least Bank of China is easy to pronounce. And it is owned by the government — just like some of the best-known UK and Icelandic banks now are.

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