At Investec Private Bank, we recently committed to accelerating the pace of high net worth (HNW) remortgages, by announcing that we can accept adequate search indemnity insurance on residential properties. So why isn’t this solution more common amongst private banks, and why is it important?
Search indemnity insurance is commonly used by high street banks on vanilla remortgage cases as a way of expediting the process, as it means that a loan can proceed to completion before the results of local searches are returned.
Time saving
We know, for example, that some London boroughs and other councils throughout the UK are taking considerable time to reply to search requests and this can delay the time it takes to complete a remortgage. The addition of search indemnity insurance can therefore make a significant difference to the time it takes a client to receive their funds.
Despite this, standard search indemnity insurance is often capped at a certain property value or loan size, which means that it is not generally compatible with HNW lending. Given that the ability to move quickly is usually important for HNW clients, we found a way to break the mould and accept this time saving solution on our HNW remortgages.
Remortgaging
There are a number or reasons why HNW individuals might have a particularly strong appetite to remortgage, and also why time can be crucial for these clients.
To begin with, the bigger the loan balance, the greater the impact of reducing the rate – so for HNW clients who typically have outstanding mortgages of £1 million+, there can be a significant financial benefit in switching to a cheaper rate and faster completions can potentially save thousands of pounds.
Our experience also tells us that HNW individuals are continually looking for ways to free up capital for a number of purposes, which could include home improvements, estate planning or deploying the funds on investment opportunities that could provide larger returns than the cost of borrowing against their equity. There can often be tight timeframes to meet and so a faster remortgage process can be very attractive.
HNW individuals often have complex requirements such as multi-layered income or portfolios, comprising stocks, shares, carried interest, overseas investments and property. Many mortgage lenders lack the experience and expertise to adequately handle these cases – let alone to process them quickly.
Networks
However, we still see some networks restricting their brokers to using only mainstream lenders and perhaps a couple of specialists. In doing this, they could be denying their brokers the chance to adequately help their HNW clients, which could be particularly bad for business.
As the number of HNW individuals continues to grow, however, we are seeing more demand from brokers who want to work with lenders with specialist expertise in this area, and we are having more conversations with networks about joining their panels.
Last summer, the demand for a specialist and flexible approach to HNW clients was acknowledged by Sesame, which appointed Investec as the first private bank on its panel of lenders.
The network recognised that private bank lending can offer its members something quite different to the traditional mortgages of high street lenders because of the specialist expertise they have in the HNW sector and, as such, a private bank would offer Sesame members options that they are unlikely to access elsewhere.
We expect more networks to follow suit this year and we are keen to have conversations about our approach to providing a faster solution for HNW remortgages, as well as the other benefits of working with Investec Private Bank.
