One of the first steps when securing a mortgage is finding the ideal lender -though this is not always as simple as it sounds. Customers used to simply pop into their local high street branch to begin an application. However, it’s clear that the defining rules of the mortgage world have evolved drastically. Hundreds of lenders have popped up on the market and regulators are introducing stricter criteria than ever before.
As the market has become saturated with increasing demand – especially from overseas investors – and an influx of lenders, it can be confusing to know which direction to turn; even more so if your requirements are complex.
That’s why we’ve put together the five key differences between high street lenders and private banks you should be aware of when putting your mortgage process in gear, so you can gain a greater understanding of the many lending opportunities on the horizon.
Calculating affordability for complex cases
High street lenders are transactional and work in volumes as they have predetermined targets to reach. Because of this, underwriters have a fixed and procedural approach, using strict ‘tick-boxes’ to assess clients. Especially since the regulator’s Mortgage Market Review (MMR) introduced tightened lending criteria, high street lenders are cautious when it comes to any case that doesn’t come with a “vanilla” income structure.
Private Banks, on the other hand, have much less rigid criteria than their high street counterparts and, consequently, are willing to consider a wider array of clients. Offering in-depth assessments, private banks will take the entire wealth of a client into account, thus tend to be the most viable option for self-employed, foreign national and ex-pat clients, or if you receive income in either a foreign currency or in the form of a bonus.
Taking a holistic approach
Private banks make their decisions on a case-by-case basis, considering you as a name rather than a number. Viewing the bigger picture of your circumstance when calculating affordability, they will usually concentrate on your goals and prospects rather than criteria. This more holistic approach means they are usually willing to take the entire wealth of a client into account rather than the usual requirements, as well as considering your personal circumstances in greater depth. More flexible criteria can also mean more influential underwriters when working with a broker.
However, high street lenders can be a better option if you’re borrowing small amounts on only one property, providing access to many appealing rates. Yet their mass-market approach can be a turn-off, as private banks strive to establish long-term relationships and offer greater flexibility in return.
The use of Assets under Management
In the past, linking Assets under Management (AUM) to a mortgage was the priority for Private Banks as they sought to manage a portion of your assets; be it cash, an investment portfolio or your pension. This frequently caused alarm bells for borrowers who were understandably reluctant to put all their eggs in one basket or transfer assets already committed elsewhere.
As Private Banks are not driven by volume of business in the same way high street lenders are – and are generally more flexible and understanding with their lending – they sometimes ask that assets are moved to sit on their balance sheets as a trade-off. This naturally drives the rate down even further and can be hugely beneficial if the borrower has an investment to leverage. In almost every instance it can work to a borrower’s advantage, creating greater scope when brought to the negotiation table. However, this has begun to shift for some lenders, so it is not always necessary if you do not wish to commit (although slightly higher rates may be expected to compromise).
The ability to work to a quick time frame
The majority of clients come to Enness because they are working to a tight time frame. If you are in need of a quick finance solution, contacting a broker directly will offer a much faster result than anywhere else. When it comes to your local branch, although it may be more convenient to simply pop down the high street, you will almost always have to wait at least a few weeks for a consultation appointment before you are able to even determine whether you can access the necessary finance.
Contrary to this, a broker like Enness will be able to provide a consultation immediately and introduce you to the right lender soon after. Using a broker’s whole-of-market access to identify the most sympathetic assessment criteria and contacts to lenders will result in a swift solution and a lucrative deal to go with it.
Creating bespoke products and solutions
A unique selling point of Private Banks is the service you receive, which is nearly always tailored to the specific client’s personal requirements. This is compared to the one-size-fits-all criteria of high street lenders. As such, working with a broker allows you access to thousands of mortgage products, and consequently, the broker can create bespoke products for you.
At Enness, we can pitch your prospects to a Private Bank and negotiate with an underwriter to secure bespoke terms. While high street lenders advertise some of the cheapest rates, these often come with percentage-based fees which are especially lucrative for the bank on higher value mortgages. A Private Bank, on the other hand, will help you evaluate the total cost of a mortgage, and access cheaper products and solutions as a result.
To avoid risking your credit score and having an application turned down, we always recommend you contact a broker who will scour the market on your behalf and decipher the best options and lender available to you.
We believe strongly in keeping our clients as informed as possible, so we hope you have found this useful. For more details, please do have a flick through our guide library, where you will find in-depth, market-leading whitepapers on the mortgage process and specific product-related information.
If you have any more questions about the differences between private banks and high street lenders or the mortgage process in general, please do get in touch below.