Naturally, however, the effects that this sharp uptick in rates is having on the wealthiest individuals is seldom part of the conversation.
As mortgage lenders and brokers, we cannot ignore the challenges that high-net-worth individuals (HNWIs) face in the current climate – particularly when one considers the difficulties many already encounter when trying to secure a mortgage in the first place.
How have higher rates impacted HNWIs?
The mortgage landscape has been transformed by the sharp increase to the cost of borrowing, and HNWIs are not immune.
Broadly speaking, HNWIs direct their investments towards high-value, prime properties. Consequently, many undertake notably larger mortgages with terms between five and 10 years, rather than 25 or 30-year products common among average homebuyers.
With less time to spread out increased costs on an already large mortgage, some HNWIs will be finding it harder to effectively handle the substantial and swift fluctuations in the base rate. This comes on top of the inherent difficulties that HNWIs face when applying for mortgages.
Indeed, due to their intricate financial backgrounds, inconsistent income patterns, and absence of traditional credit records, HNWIs are often turned away from mainstream banks which are unable to understand their unique needs and motives.
For example, many lenders will not supply finance for property that will not be an individual’s primary residence, so HNW borrowers seeking finance for investment properties, pieds-a-terre or second homes will immediately struggle to find a mortgage on the high street.
Given the rise in borrowing costs has prompted many mortgage providers to further tighten their lending criteria, the challenges involved in HNWIs accessing loans have become accentuated. The responsibility of supplying a mortgage that is tailored to the bespoke needs of HNWIs, then, rests with specialised lenders, along with the help of brokers experienced in working with wealthy clients.
Specialist lenders are best placed to support HNWIs
HNWIs need lenders and brokers that can assess a more inclusive, holistic picture of their financial situation, as well as their investment motives. So, working with specialists in prime mortgages is important – it is a particular skill and experience, with the ability to cater to each client on a more bespoke basis especially valuable in the current climate.
Lenders and brokers must invest time to assess each application on a case-by-case basis, which allows lenders to provide greater flexibility in their criteria and loan terms. That said, lenders also have to support HWNIs after the mortgage arrangement is finalised.
Butterfield Mortgages recently conducted a survey of mortgage customers in the UK. It revealed that just 44 per cent of borrowers feel they have received satisfactory guidance and communication from their mortgage providers since the initiation of the interest rate hiking cycle in December 2021.
This underscores the importance of lenders working with borrowers to recognise potential issues as they arise and, whenever possible, bringing forward solutions.
The necessity for this aid extends to HNWIs regardless of their affluence, and lenders must be unwavering in their dedication to aiding borrowers who need to continue to invest in property with a sense of assurance.
