Britain's high-net-worth individuals are routinely being turned down for credit cards, loans and mortgages, according to research.
A million of the UK's richest people have been unable to secure overdrafts and loans, despite having personal assets worth more than the loan they seek, according to a survey by Market Financial Solutions, a London-based bridging lending provider.
The issue is a particular problem in London where 35 per cent of Londoners have denied credit in the last five years – twice the national average.
According to the research, 1.3m high-net-worth individuals have been turned down for loans and credit cards. In the past five years, 818,000 of the UK’s top 12 per cent of earners have been unable to secure a first, second or buy-to-let mortgage due to a poor credit rating.
Of the 2,000 surveyed, 17 per cent of high-net-worth individuals had been denied a credit card, bank loan, commercial loan or overdraft.
Since the financial crisis, banks’ lending criteria has tightened, with providers assessing borrowers on ‘affordability’.
Millennials are also struggling to secure credit, with a third of 18 to 34 year-olds refused loans from high street banks.
According to the survey, 31 per cent of Britons are unhappy with the UK’s lending system, with London and the North East topping the polls at over 40%. However, only 55 per cent of consumers are aware of alternative financing arrangements.
“Whether you’re a high-net-worth individual or a prospective property buyer, there is a clear problem for British consumers and investors attempting to access traditional lines of credit,” said Paresh Raja, chief executive of Market Financial Solutions.
“Londoners are clearly struggling, and this is concerning when you consider that the price for London property is continuing to rise. The current processes adopted by the UK high street’s big-name lenders are clearly restricted in their effectiveness due to excessive red tape that is putting property purchases at risk, and inhibiting borrowers from fulfilling their intentions, both in business and in their personal lives.”
Ben Yearsley, investment director at Wealthclub.co.uk, argued that in this era of low interest rates many conventional loans have simply become unprofitable for lenders.
“I was in Marks & Spencer’s recently and the rate offered [for a loan] was 3.1 or 3.2 per cent. That’s not massively profitable,” he said.
“My credit card I pay off in full every month and so [the bank] isn’t making that much money from me. “Whereas if you’ve got £2,000 on your credit card [you’re worth more to the lender]. “With rates that low today it’s just not worth lending to people who aren’t going to default."
Mr Yearsley also highlighted the tougher lending criteria. “I’ve got wealthy friends who are getting a bigger mortgage and the banks go through their statements in minute detail, asking why you’ve spent £3 in Costa [Coffee], even though you’ve got hundreds of thousands of pounds in assets elsewhere. It’s any excuse not to lend.”