It seems counterintuitive but HNWs often face difficulties when securing mortgages in the UK, writes Alpa Bhakta
In 2019, Butterfield Mortgages Limited (BML) commissioned independent research into the difficulties HNWs face when securing a mortgage in Britain. The survey, drawing on responses from more than 500 UK adults with assets in excess of £1 million, found one in nine (12 per cent) had been refused a mortgage in the past decade.
It is, in part, a result of the risk-averse approach now adopted by many conventional lenders since the global 2008 financial crisis. Indeed new regulations in the UK, such as the Mortgage Market Review (2014) and Mortgage Credit Directive (2016), have resulted in a more stringent approach to assessing mortgage applications. Consequently, wealthy borrowers – who often do not match some lenders’ tick–box methods – are among those who struggle to access credit.
This has resulted in frustration among HNWs. BML’s study found that the vast majority (79 per cent) of respondents feel conventional lenders are too rigid in their approach to assessing mortgage applications, failing to take individual circumstances properly into account.
Of course, no two HNW mortgage applicants are the same. The variety they present in their financial profiles is a cause for difficulty and concern among lenders not well-versed in this market. For example, HNWs are often not seeking mortgages for their sole or primary residences and many are not actually based in the UK. Both these factors can cause problems.
Three-fifths (60 per cent) of HNWs believe it has become more difficult to secure mortgages for non-primary residential purchases. Two in three (67 per cent) feel conventional lenders do not do enough to cater to the needs of property investors. Another challenge for HNWs is their irregular – or perhaps non-existent – sources of income. For some lenders, including high-street banks, any applicant unable to present a monthly paycheque will be turned away.
Some 38 per cent of surveyed HNWs said the main reason they struggle to secure credit from banks is because they do not receive a structured income. Similarly, 44 per cent find it inherently difficult to secure a mortgage because their capital is tied up in existing investments.
Specialist lenders who have experience working with HNWs understand the importance of carefully considering borrowers’ unique personal circumstances. This involves investing time into uncovering the assets they own, the money they can access, the incomes they receive and why they require the loan. Intermediaries such as brokers and wealth managers also have an important role to play in ensuring the right lenders are approached.
The banking landscape has changed in the past 10 years, and the challenge of getting a mortgage as a HNW is more pronounced than ever.
While it may surprise some that the super-rich can be turned away for credit, it is the role of expert mortgage providers to ensure this area of the property market receives the support it requires.
Alpa Bhakta is the CEO of Butterfield Mortgages Limited, part of the Butterfield Group and a subsidiary of The Bank of N.T. Butterfield & Son Limited. Butterfield Mortgages Limited is a London-based prime property mortgage provider with a particular focus on the needs of UK and international HNW individuals.