BestAdvice (BA): Search indemnity insurance is commonly used by high street banks, but why is it less common in the HNW space?
Joe Websper (JW): Search indemnity insurance is commonly used by high street banks on vanilla cases as a way of expediting the process, but it’s uncommon in the private banking space because of the high value of properties and the complexity this can cause.
However, at Investec Private Bank, we recognised the demand from HNW clients for faster remortgages and were able to recently announce that we can now make use of a no search indemnity policy rather than waiting for the usual suite of searches, to make the process as quick and easy as possible.
The ability to move quickly is usually important for HNW clients and we know that some London boroughs and other councils throughout the UK are taking considerable time to reply to search requests. This can delay the time it takes to complete a remortgage and search indemnity insurance will remove this time consideration from the process.
BA: Why should brokers be particularly alert to the remortgage opportunity in the HNW space?
JW: There are a number of reasons why HNW clients may have a stronger appetite to remortgage. To begin with, they are often larger loan sizes and so even a small improvement to the rate that is being paid can result in a significant financial saving. Our experience also tells us that HNW clients are continually looking for ways to free up capital to increase their wealth and remortgaging is obviously a major way for clients to release the equity in their property to deploy it elsewhere.
HNW remortgages provide a big opportunity for brokers because they can add real value by working with a lender to structure a solution for their client. As loan sizes are also often large, so too is the potential reward.
BA: Why might a broker choose to work with a private bank on a HNW remortgage rather than, say, a high street lender?
JW: Working with HNW clients usually comes with layers of complexity and the need for a bespoke approach that is not available from the high street.
HNW clients are often reliant on their multiple layers of income and assets, which might comprise stocks, shares, carried interest, overseas investments and property.
Such clients might not be able to walk into their local bank branch and pick an off-the-shelf mortgage product. They require something custom made from a lender that is able to look at the bigger picture.
It’s this bespoke approach to multiple layers of complexity that makes private bank lending a vital tool in a broker’s armoury.
BA: Are product transfers a valid option for HNW clients?
JW: When looking for a pound for pound remortgage, a product transfer can be the most suitable option for many clients who aren’t looking to raise additional borrowing. However, there is a danger that the allure of perceived convenience can overshadow any opportunity to improve their financial position and so automatically reverting to a product transfer is a habit that brokers need to resist.
A product transfer could deliver the client an improved rate, but there may be better rates available by reviewing the market. More pertinently, a review of the client’s financial position could determine that it is better to restructure their lending, perhaps with a long-term fixed rate, a flexible revolving facility to access locked up liquidity or an interest only loan to reduce monthly cashflow commitments, for example.