What is a private bank?
Private bank mortgages will judge each application on its merits rather than follow strict criteria or tick lists as many high street lenders tend to use. For example – private banks and private bankers consider various income streams and will not always look for a standard number of years of accounts or traditionally steady income streams. This, for many of our clients, is an essential solution.
We have seen a significant increase in the number of private banks over the past decade – each with a different appetite for solutions and clients.
Download our High-Net-Worth guide for further information on HNW solutions.
Why use a private bank?
Private banks can potentially offer large mortgages to high-net-worth individuals, with the emphasis very much on individual circumstances rather than satisfying criteria. Private banks are also likely to provide a tailored service in the long term, meaning they can come with more flexibility.
This flexibility gives our clients the freedom to do more with their money through debt. They are able to work with clients on a personal level to understand their goals and find the most effective way to achieve them.
The rise in the competitiveness of the private bank
Changes to the private bank took place progressively over the 1980s and 1990s. This was largely an evolutionary process, but several factors contributed to an intensification of competition and tended to erode the functional distinctions between high-street lenders and Private banks.
Private banking used to be popular at the time only by UHNW investors, as high street lenders often capped loans to £1 million. However, by about 2010 – partly due to rising house prices – the high street raised their maximum loans to £2m, and the rates they applied were far cheaper when compared to Private Banks.
Private banks also regularly asked for assets under management which traditional banks did not require.
In recent years, this rise in the competitiveness of high-street lenders has forced private banks to become more competitive. The cost of a private bank, when compared to a traditional bank, is now close to parity, whilst some private banks no longer require assets under management.
The use of private banks today
From resilience, the need for more significant margins and the capacity of private markets to adapt to the various competitions coming from high street lenders, the private banking industry faced positive evolution over the years.
This has not only benefited their traditional clients (UHNWs) but also has increased their ‘perfect’ client profile to the lesser wealthy, giving the wider audience access to private banks. Some examples of their uses are described below:
- Wider relationship/ Personal attention – Private banking can offer access to experienced professional bankers who are far more likely to have the authority and autonomy to make decisions without deferring to standardised internal credit models or generic lending criteria.
- Competitive pricing – as mentioned, over the past five years, their pricing has become significantly more competitive, their margins have reduced, but their demand has increased – this gives them the ability to lower costs.
- Flexibility – This is of particular interest to our clients. Private banks don’t simply offer a mortgage – they offer a solution. There are many examples of this, including; no deposit mortgages, various assets as security or the ability to consider multiple incomes or working with no income at
Why use a broker?
As previously mentioned, there has been a significant increase in the number of private banks. Each private bank has its own ‘appetite’ and ‘perfect’ client. This is based on residency, nationality, source of wealth etc. Therefore, the client needs the experience to understand which bank prefers which client.
On top of this – and almost more importantly – the presentation of your case is paramount. The relationships we have with private banks and private bankers ensure that we can get the most effective solution for our clients, no matter the complexity.
