Mainstream banks and building societies are increasingly targeting high net worth mortgage clients who typically have a large deposit and so are viewed as lower risk. But are these lenders the best option for someone seeking a larger than average mortgage? There are still other options, in particular private banks that can offer competitive rates as well as a greater degree of flexibility when it comes to the terms of the loan. Private Banks continue to offer a real alternative to mainstream banks in a large part due to the flexibility they show when considering a potential client's income stream and preferred methods of repayment. Private banks for their part are particularly focused on borrowers seeking mortgages of 1 million or more who have a range of assets that the bank can also bring under their own management.
Some private banks have tightened their lending criteria for borrowers who do not have other assets that they are willing or able to transfer to the private bank's management. Some will not lend on a mortgage at all if they cannot also take over management of assets, so-called “dry lending”. Therefore, the private bank route is not the best option for everyone seeking a million pound plus mortgage as these institutions view clients from a whole wealth planning perspective.
What this means for wealthy individuals looking for a very large mortgage without other assets or without wanting to commit any of their assets to a private bank, is that they have a reduced choice of options than they had a year ago when private banks were less focused on creating a management relationship.
However, it is still possible for high net worth borrowers to secure a competitive mortgage from a private bank without transferring cash or other assets. It is likely that a client will have a property to sell or assets to realise in the future and some private banks will take these into account in a longer term view of building their relationship with the client.
It is unlikely that we will ever see private banks being able to compete with the extremely low headline rates offered by some mainstream banks and building societies but what they do offer is a cost effective and much more flexible alternative for some wealthy borrowers.
So for certain borrowers, private banks can provide competitive interest rates for large mortgages. A typical private bank mortgage currently available is likely to be 1.5 to 2 per cent over Libor for a 5 year term if an individual transfers assets under their management or around 3.5 per cent over Libor if there are no assets to manage.
A leading London mortgage broker points out that often the 'best buy' deals listed in the national newspapers will have maximum loan limits of 250,000 or 500,000. Sometimes a mainstream lender will be willing to advance a large mortgage above these limits but some potential borrowers also have complicated income streams such as offshore income, bonuses and trusts so will find that, even then, they will not meet a mainstream bank's lending criteria.
This article has been written on behalf of Enness Private Clients, who offer an expert and focussed service specifically for clients requiring large mortgage . As a specialist london mortgage broker they work with people from all walks of professional life from lawyers, hedge fund managers and board directors to entrepreneurs and self-employed business people.