The FCA defines a high-net-worth (HNW) mortgage client as: “A customer with an annual net income of no less than £300,000 or net assets of no less than £3,000,000, or whose obligations are guaranteed by a person with an income or assets of such amount.”
Why is this important for buy-to-let (BTL)? Because, although the FCA does not regulate the sales of most business BTL mortgages, the advice can in some circumstances fall under FCA jurisdiction.
It is not always easy to locate lenders that can help
For example, under the new Consumer Duty rules, if the advice on a business BTL mortgage is linked with the advice on a residential mortgage, this will be captured by the duty.
In addition to business BTL, there are other types. These are regulated and include consumer BTL and family (regulated) BTL. However, should the client be deemed an HNW applicant, not all of the regulated protections apply, and lenders can offer more bespoke criteria around areas such as affordability.
Regulation is not the only consideration here; access to the right lender options is important. Some advisers specialise in HNW clients, who often have particular requirements, such as large loans. Sometimes the HNW applicant resides offshore as either an expat or a foreign national.
Finding the right solution for this type of client isn’t as easy as checking the sourcing systems and selecting a product
Even if someone is defined as HNW due to assets, they may also have a large income. With higher interest rates, landlords can struggle to borrow the higher LTVs because of the rental affordability calculation. HNW applicants could use their income to access income-based BTL or top slicing to maximise their borrowing.
Advisers looking after HNW applicants must also be well versed in offshore income and offshore limited companies. While specialist BTL lenders will consider lending to UK limited companies, it is not uncommon for HNW applicants to hold their assets in an offshore company, or for an offshore company to be the shareholder of the UK company.
Not all BTL lenders are able to cater for these types of client. Some may cap the maximum loan size or restrict lending to companies based in the UK only.
The table below shows some of the lenders that can assist HNW clients at 75% LTV on a £3m BTL purchase.
Most of the data was sourced from Twenty7tec but the offshore company column was sourced from Business Moneyfacts. The latter also highlighted Gatehouse as a possible offshore company lender. However, Gatehouse’s website indicates it lends to UK companies only, with a maximum loan size of £1m.
Neither system highlighted lenders such as Octopus or Shawbrook, which offer some or all of these solutions. Many private banks can also help but are not available to source on traditional sourcing systems.
You will need to use multiple systems, cross-check the information with lenders and perhaps use packagers and distributors that specialise in these areas
I also question the information from Twenty7tec and Business Moneyfacts. Interbay and Kent Reliance are both part of One Savings Bank, yet there was conflicting data on expats and offshore companies.
When looking at other search options, Octopus and Shawbrook appeared on Ignite, but again one could not search for lenders that would consider offshore firms.
The fact is finding the right solution for this type of client isn’t as easy as checking the sourcing systems and selecting a product. Solutions offered can be bespoke, and it is not always easy to locate lenders that can help.
You will need to use multiple systems, cross-check the information with lenders and perhaps use packagers and distributors that specialise in these areas. But the rewards are likely to be worth it!
Liz Syms is chief executive of Connect Mortgages
This article featured in the November 2023 edition of MS.
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