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Secured lending - the rise of the high net worth client
Marie Grundy of V Loans explores the increased high net worth client presence that has emerged in recent months within the secured lending industry...
They say you learn something new every day, and it would seem that no matter how long I have worked in the secured loans industry, it always throws up a new angle on lending that may not have existed before and certainly not post credit crunch.
For the first time since the financial meltdown, we have seen innovative Secured Loan Products launched by the likes of Link Loans and Nemo Personal Finance. This has led to a surge in applications from high-net-worth clients who previously would have had no issue in approaching their high street lender for a further advance.
Life, as we all know only too well, is not as simple as it used to be and an increasing number of further advance applications, even for the most credit worthy of borrowers, are being restricted or, worst case scenario, refused altogether.
To elaborate further, let me give you a typical scenario we are coming across more and more often. The borrower has an interest only mortgage, and their mortgage lender says: “No problem Mr Customer, you can have your further advance but we’ll only let you have your money if you convert your interest-only mortgage to a repayment mortgage at the same time.” Sound familiar?
Or what about: “You want to borrow to consolidate your debts? – Sorry we don’t lend for that loan purpose,” or even “You can have half of the money you requested, and it will be sometime before Christmas”.
OK, so maybe the last point is a little unfair, but the length of time it takes for clients to obtain finance from their mortgage lender is a real source of frustration and one we come across only too often.
We recently assisted a Human Resources Director, earning in the region of £250,000 a year, who had been offered half the amount he had requested from his mortgage company, who incidentally had taken an age to get back to him.
He totally lost faith in their ability to service his borrowing requirements and instead could borrow £100,000 at 8.5 per cent APR through the Link Platinum Product – it took 22 days from the date we first spoke to the borrower to the date he received the funds.
This borrower was not an isolated case, and it is no coincidence that we celebrated a record month for gross lending at V Loans, with an average loan size of just under £50,000 in July.
The other key source of business for us has been from clients who are benefiting from base rate mortgage products, and it would simply be poor advice to prise them away from this preferential rate to enable further borrowing.
With maximum redemption penalties of two months interest applicable to Consumer Credit Act Regulated Loans, when the time does come to remortgage your clients, you can do this in the knowledge that they are not going to be hit with a massive penalty upon redemption.
If, up until now, you have been a mortgage broker or financial adviser who has only considered secured loans to be appropriate for clients with a slightly chequered credit history, or self employed borrowers struggling to prove income, than you really need to take another look at what secured loan products can do to provide a real alternative to traditional lending products for clients you may never have considered would ever need or even consider a secured loan.
You can do this with the confidence of knowing you have a specialist broker, such as V Loans, who exclusively deals with intermediaries across the UK, working hard on behalf of you and your clients to secure the lowest possible rate and meet your clients specific requirements, something which I feel, for one, our friends on the high street often don’t get quite right.
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