Investec’s study of corporate executives, finance professionals and entrepreneurs with average earnings of more than £510,000 found that 90 per cent were rejected for a mortgage.
In the last five years, 84 per cent of high net worth applicants had to accept a lower LTV or put down a larger deposit to secure their preferred mortgage. The most common reason for this was the complexity of their income, such as the bonus they received or being paid in foreign currency. This resulted in average LTV reductions of 20 per cent.
On a £1m property, this would mean having to find an additional £200,000 to access a 60 per cent LTV loan instead of an 80 per cent LTV deal.
Some 54 per cent of respondents said they had to accept an LTV which was 20 per cent lower than expected while 36 per cent saw an LTV reduction of between 20 and 30 per cent. A tenth of respondents had to accept an LTV of 30 to 50 per cent lower than originally thought.
Complex circumstances
Almost two thirds said they had been put off from buying a home because of the difficulties faced, while 56 per cent were discouraged from buying an investment property.
Nearly a quarter of respondents said they got a mortgage with a specialist bank while 36 per cent got their loan from a mainstream bank. The remaining two fifths used both kinds of lender.
For 37 per cent of respondents, the LTV limit was the reason their application was turned down and for a third, the rejection was due to the property they wanted to borrow against.
Some 31 per cent said they were rejected for a mortgage because they received income in a foreign currency while 26 per cent found that their limited credit history in the UK resulted in a failed application.
A fifth said the nature of their employment, such as being partner of a firm, led to their mortgage application being rejected.
Siobhan Sames, private banking team lead at Investec, said: “Both high earning professionals and successful entrepreneurs will often struggle to secure the mortgages they want from conventional mainstream lenders due to the complexity of their incomes.
“High earning professionals, for instance, are more likely to receive discretionary income (i.e. bonuses, profit distribution or carried interest) which may not be recognised as earnings by some lenders while entrepreneurs may face issues over proving their income despite running profitable businesses.”
She added: “It can be hugely frustrating for these high net worth individuals to be rejected for mortgages or unable to secure the deals they’re looking for. There are however a growing number of specialist banks which can offer personalised lending based on a deeper understanding of an individual’s circumstances.”
