By Hugh Wade-Jones, Director of Enness Private Clients
Non-mainstream lenders plug a gap
It is an oft-repeated misconception that private banking is the sole preserve of the ultra-rich; the Richard Branson’s and Phillip Green’s of this world. The reality is that non-mainstream lenders have plugged a gap created by a reluctance on the part of high-street banks to cater effectively for high net worth borrowers and fully understand their needs. As a brokerage, we still use the big banks for some deals, but when it comes to customers earning in excess of £250,000 or looking to borrow more than £500,000, going private is increasingly the way to go.
A better distribution of wealth
The recent Mortgage Market Review (MMR) proposals suggested that high net worth individuals may be exempt from some of the hoop-jumping criteria that other borrowers face and this prompted cries of unfairness from some quarters. But what the MMR acknowledged – and what many high-street banks fail to understand – is that it makes little sense for affluent individuals to tie up vast sums of their wealth in property when their money can be working harder for them elsewhere.
High net worth borrowers often have complex incomes that can include bonus payments, profit-sharing agreements and living allowances or may be self-employed and therefore looking to run their businesses as tax efficiently as possible. These circumstances all mean their income may fail to tick the boxes required by the high-street banks, even though they can comfortably afford the repayments.
More flexible tailored solutions
Private banks are a lot more willing to take all these factors into consideration and make a lending decision based on the wider picture. They can often offer flexible, tailored solutions as opposed to adopting a one-size-fits-all approach, which is woefully inadequate for a market segment with complex needs.
Some advisers have been reticent to deal with private banks for mortgages in the past for fear they will want to take a client’s other investments under management, but this is a fallacy as they will often work in close conjunction with advisers to ensure they don’t disrupt existing arrangements.
A viable alternative
In a market where high-street lenders are not showing much of an appetite to lend, and often struggle to acquire the funding to do so, private banks have become a viable alternative for mortgage brokers looking for flexible underwriting and tailored solutions. Banish any pre-conceived notions of old school ties and Russian oligarchs and start embracing private banks today.