Private Banks and the practice of ‘tiered lending’
Barclays Wealth International has recently launched three tiers of rates, based on: lending, lending plus banking and lending, banking and fund management.
They are not the only lender to do so; private banks such as Butterfield, EFG, Credit Suisse, Kleinwort Benson, Coutts and Investec (to name but a few) will use their discretion on pricing to reflect the balance of lending risk and banking opportunity offered by the potential client.
It’s not new, but it is an area of the market that some clients are not familiar with and, if they don’t have a relationship with a wealth management service provider, they might like to consider this kind of arrangement.
Private banks offer sophistication and flexibility, not just tiered pricing. They structure their loans in a way that is tailored to clients’ needs, as opposed to the client having to make adjustments to satisfy the lender. An example is something as straightforward as the acceptability of various means of repayment; private banks are generally far more flexible on this than mainstream lenders. In addition, private banks will tend to lend in excess of £1 million, whereas mainstream lenders prefer to lend up to that limit but no further.
Private banks will also better understand business people, professional and entrepreneurs and how their income can flow from many sources and in an irregular fashion. Their attention to personal service is also attractive to busy people who need to get on with their lives.
It is important to remember that a private bank is not the only place to go if you are high income, high net worth borrower, as there are many good deals in the high street which should not be overlooked. One thing that is certain is that this area of the property finance market does need a specialist broker to guide the client to the most appropriate lender and deal.