Mainstream mortgage lenders are increasingly targeting high net worth borrowers, offering them bespoke ranges with greater flexibility, a mortgage adviser has said.
According to Private Finance, since the financial crisis that saw the introduction of more rigid lending processes high net worth clients have found it difficult to secure loans.
This is because lenders' rigid ‘tick-box’ approaches to lending to minimise their exposure to unnecessary risk meant many HNWs were no longer meeting the criteria.
This was already alleged by Butterfield Private Bank in March, which found about a ninth of HNW clients had been turned down for a mortgage in the past decade due to rigid criteria applied by banks
Chris Sykes, mortgage consultant at Private Finances, said: “Since a large proportion of sophisticated, high-net-worth borrowers have [complex] income profiles, these individuals are often having to look elsewhere when attempting to acquire property finance.”
But banks have already started to respond to this problem.
Mr Sykes cited Skipton Building Society as the lender that is leading the way, as not only does it offer bespoke ranges for high net worth clients, it can also tailor products to suit the needs of each borrower.
The service launched in 2017 and allows clients to mix and match key product elements, such as the term, fee and product incentive, to create tailored mortgages.
The building society also has priority underwriting with a larger loan team which assesses all cases individually and updates brokers straight away.
A spokesperson for Skipton Building Society, said: “Customers with large loan needs typically have higher than average incomes, which can often be complex in nature and don’t lend themselves to standard mortgage products.”
Mr Sykes added: “Borrowers have the freedom to select precisely how long they want to be locked into the initial term of their mortgage.
"If they need a three and a half year loan, maybe their children are due to finish school at the end of this period, at which time they want the freedom to downsize if they so choose, then Skipton’s bespoke offering will be able to accommodate this desire, allowing the borrower to avail themselves of the lender’s five-year fixed rate while only locking in for three and a half years’ worth of early repayment charges.
“Bespoke products of this type are often more expensive than standard, cookie-cutter mortgage products – in actuality, the costs of such mortgages are closer to those of private bank mortgages than to standard mainstream mortgages – but the added flexibility they provide is likely to prove very attractive to borrowers with unique and specific requirements.”
Other mainstream lenders including HSBC, Natwest, Santander, Halifax and Bank of Ireland, have offered more specialist ranges for a few years. However, there have been new entrants to the market of late.
In May 2019, challenger bank OakNorth entered the retail mortgage market with a range of lifetime trackers specifically targeting entrepreneurs, SME business owners and other high net worth individuals that have non-uniform income streams.