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Are high-street lenders finally giving private banks a run for their money?

22.02.2013

Several high-street banks have recently set out their stall and declared themselves open for business when it comes to large mortgages. While we welcome increased competition in the £1m-£2m arena, we remain rather skeptical as to whether the mainstream banks will actually be able to do the deal.

Don’t get us wrong: there are some great rates out there and access to the Government’s Funding for Lending Scheme will only result in even cheaper mortgage deals from the major players. But while rate is important, it is only part of the picture.

Private bank mortgages

There are several reasons why borrowers use the private banks for mortgages, which high-street lenders will struggle to replicate. Speed of execution is often crucial: the borrower may be in a contract race and need to secure funds quickly. Flexible underwriting is important: being able to explain your case to the decision makers who take the time to understand what is going on.

Borrowers tend to use the private banks because they have complex income streams that the high-street lenders don’t or can’t understand, such as retained profits in a business, income from share dividends or they are self-employed. They may require interest-only, particularly if they receive a fairly modest salary but the majority of their income is made up of sizable and fairly predictable bonuses.

Another issue may be the property they are buying: it may fall out of the remit of ‘normal’ criteria as assessed by a high-street lender. It may have a short lease, for example, or the client may intend to knock it down and build a new home to their specifications.

The advantage of high-street lenders is that they are not after assets under management (AUM). Private banks are often criticised for demanding AUM before they will consider lending. Yet we often find clients are not adverse to transferring custodianship of shares or shifting savings or other investments across if it means borrowing at around 2 per cent over the cost of funds. This can be done on investment properties too, not just residential, which is a far better rate than a borrower would get on the high street.

It is great news that there are increased choices for those requiring large loans and that rates are falling. But this remains a specialist market and specialist advice is crucial.

The answer may be on the high street but in our experience, it usually isn’t.

Adrian Anderson
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Adrian Anderson

Private bank mortgages

15.02.2013

A journalist suggested to me this week that private bank mortgages were no longer likely to be as competitive as high-street mortgages now that high-street lenders can call upon money available via the Funding for Lending Scheme FLS). He argued that while private bank mortgages had consistently undercut their high-street equivalents over the past few years, this perhaps was a situation that could not continue.

He said he would like to write about private bank mortgages in the future but confessed that he thought there would be less reason to do so going forward. Instead, the headlines would be all about applying for cheap loans because of the FLS.

Why private bank mortgages are more competitive

Yet it is highly unlikely that private bank mortgages are going to start looking uncompetitive all of a sudden when you compare them with what is available on the high street. Admittedly, we are seeing some of the lowest mortgage rates ever seen from mainstream lenders, which is excellent news for borrowers with straightforward income streams who don’t need to borrow large sums of money.

However, even better news for wealthy borrowers with complex income streams is that the private banks will still have an important role to play. You need to understand how they work in order to appreciate that they will still be able to offer some of the best mortgage rates, even if they aren’t accessing the FLS – and some private banks are taking advantage of these cheap funds.

Why you’ll never find a best buy table for private bank mortgages 

Private bank mortgages don’t come in ‘best buy’ tables which are issued to prospective customers. They are tailored to the client depending on their situation, income, assets, the property they are trying to buy or refinance, and any other properties in the background. The private bank may well offer a low mortgage rate – cheaper than the high street – in order to get that client on board, encourage them to bring over their investments and perhaps their savings.

For the private banks it is all about building a transactional relationship with the client, not simply giving them a private bank mortgage. Thus they can agree an investment mortgage on normal residential terms – something unheard of on the high street since the downturn. Private bank mortgages tend to come on interest-only terms, which suits many thousands of borrowers who can’t access these terms on the high street.

How Anderson Harris can help arrange private bank mortgages

Private bank mortgages are our speciality. We deal with many private banks and can find the right one for your situation. You might not need to transfer assets under management, it depends on the private bank. Speak to us if you require flexible underwriting and a tailored situation to fit your circumstances.

Jonathan Harris
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Jonathan Harris

Mortgage rates fall to record lows

05.02.2013

There is great news for borrowers as mortgage rates fall to new lows. With two-year fixes pegged at less than 2 per cent and five-year fixes at less than 3 per cent for those with good-sized deposits, borrowers have never had it so good.

The private banks also continue to offer competitive pricing and more flexible criteria for wealthy borrowers with more complex income streams, such as retained profits in a business and share dividends, or who require interest-only mortgages or large loans.

Of course, it is important to look at the bigger picture and look at fees as well as the rate in order to compare like with like. But you shouldn’t necessarily let hefty fees put you off: those with larger mortgages may find that it is worth paying the bigger fee in order to access a cheaper rate.

Private bank mortgages

Anderson Harris can advise on the right deal for your circumstances. We have access to many private banks and specialist lenders as well as the mainstream high-street lenders.  If you are asset rich but have limited income and are purchasing or remortgaging a high-value property, and require discreet advice, we can help.

Jonathan Harris
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Jonathan Harris