Private but not secret
‘Private Banking’ is a term that usually conjures up images of secret banking transactions being carried out on behalf Royal families, the landed gentry and wealthy individuals. That’s how private banking started, but is not a fair reflection of private banking today.
Today, it’s not your family tree that matters as much as your income and assets. Private banking is a service for high net worth individuals who are seeking a more individual (‘private’) service than that offered by mass-market retail banks.
How wealthy do clients need to be? It varies from bank to bank, but here at Investec Private Banking, if a borrower is applying for a mortgage we ask for a minimum primary annual income of £300,000 and typical net worth of approximately £3 million or more.
As a mortgage broker, you may not have come across private banks very frequently or seen their mortgage products listed on mortgage sourcing systems. Why is that? The answer is because most private banking mortgage deals are bespoke solutions, created specifically for borrowers whose financial arrangements are more complex than the norm and who require a mortgage designed for their specific needs.
It’s not unusual for wealthy individuals to have money tied-up in various types of assets from property to shares. Although they are wealthy, they may not want to liquidate their existing assets to buy property, hence the need for a mortgage.
Their income may also derive from several different sources including salary, vesting shares and dividends and not all the income may originate from within the UK. For example, senior bankers working in the City for a European or American bank may receive their salary in sterling but their annual bonus in euros or US dollars. If the bonus is to be considered for mortgage purposes, then the loan will be categorised as a foreign currency mortgage under the MCD rules.
And the loan application may well be for a large sum, for example between £1 million and £10 million, which is outside the criteria of many high street lenders. The point is that mortgages for high net worth borrowers are often complex, with multiple factors needing to be taken into consideration that go well beyond the issues a broker would normally encounter with a ‘standard’ borrower.
Private banking is all about analysing each and every application on its own merits and creating a solution that meets the specific requirements of the individual borrower. Private banking also encompasses all aspects of wealth management including asset management, foreign exchange, offshore banking and financial planning.
Your clients doesn’t need to be an established customer of a private bank and have assets already held under management before they will consider his or her mortgage application. At Investec Private Banking, for example, our philosophy is that if we can satisfy a client’s borrowing requirements, then they are more likely to let us also look after other aspects of their wealth management. We’re therefore happy to lend as a first transaction with a client.
Private doesn’t mean secret. It simply means personal. And at some point you may well have a high net worth client who may benefit from a more personal mortgage service.
