Guest blog: Lending to HNW and affluent clients

People are often surprised to find that HNW and affluent clients struggle to access credit. Between 10 and 20 per cent of HNW individuals in the United Kingdom struggle with access to loans.
The main drivers behind this are irregular income, poor credit history, and bank regulations. Wealth often comes from assets and businesses, not income, which is often the main measure used by High Street banks. On top of this, HNW and affluent clients expect high levels of service so dedicated lenders and brokers have emerged to meet the bridging needs of the wealthy.
Starting at the beginning, with the brokers. In order to work with their clients, many maintain offices in desirable locations such as Mayfair, City of London, and Oxford. They also maintain staff with experience and a focus on providing high levels of customer service. This is not simply a matter of responding quickly to emails or always having a phone handy but a broker must be able to understand their client’s complex portfolio not only of properties, but also how to truly measure their wealth.
Most property lending requires affordability checks, and it is often up to the broker to demonstrate a client has the means to repay a loan. While this is standard for all bridging loans, in cases where a client keeps most of their money in a stock portfolio or reinvests it in their business, it is often difficult to clearly demonstrate liquid wealth. The broker must be able to explain to the lender both their client’s needs and their ability to repay the money they borrow.
The lender, like the brokers, must be able to understand similar structures. For instance, if a client holds their wealth in a private company, then a lender must be able to get comfort with this structure in order not to hold up the process overall. Similarly, wealth may be held in pensions or other investment structures that require a specialist like Clifton in order to release the equity they hold. One of the key ways this can be done, is by offering direct access between the underwriting team and brokers. This enables the lender to understand a client’s needs and financial profile quickly, and get any questions answered as soon as possible to keep thing moving. Once a lender has established comfort with the client and their property, then the lending offer must also fit the client’s needs.
HNW and affluent clients often require larger loan amounts than average loans – the average mortgage size for properties valued between £1,000,000 and £2,000,000 is over £400,000 – compared with a UK average of £85,000. This means that the lender needs to be able to fund large loan amounts quickly and frequently. Borro has seen many cases where a lender decides at the last minute that they are uncomfortable with the size of loan requested and the client’s financial profile. Providing high loan amounts to clients with irregular credit simply isn’t for everyone.
This is where Borro and Clifton comes into their element. Borro’s luxury asset loans are often funded within 24 hours, making it a convenient solution for clients working on releasing equity from their pension. For clients whose investments have focused on property, bridging loans are available that close in a matter of days. Together, Borro and Clifton provide clients with a convenient, worry free, alternative finance solution, that works in even the most unusual or complex scenarios.
Anthony Fernandes
Business Development, Borro