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  1. Analysis
June 7, 2019

How the complex income of HNWIs can lead to mortgages rejections

By Alpa Bhakta

Alpa Bhakta, CEO, Butterfield Mortgages explains why 12% of HNWIs have been rejected for mortgages over the past decade, and what can be done about it.

hnwis mortgages

Alpa Bhakta


To anyone unfamiliar with the mortgage market, it might surprise you to learn that individuals with net worths well into the millions can struggle to find a lender willing to provide them with a mortgage.

Earlier this year, Butterfield Mortgages Limited (BML) surveyed more than 500 high net-worth individuals (HNWIs) – all with a net worth over £1 million – about their experiences when it comes to securing finance from banks. We found that 12% of the wealthy individuals surveyed have been rejected for mortgages in the past decade.

Why are HNWIs struggling to be approved for mortgages?

Essentially, this trend comes down to three related facts of the post-2008 financial landscape. First, the propensity for mortgage providers to be more risk averse. Second, a new regulatory environment that makes lenders less flexible. And third, the fact that individuals with complex financial arrangements are often unable to meet the narrow set of criteria that high street lenders use to analyse mortgage applications. At BML, it’s become a truism that the wealthier an individual, the more complex their finances and this certainly limits the ability of HNWIs to secure credit in the current climate.

This can create new obstacles for prospective borrowers, especially where mortgages are concerned. Since the 2008 financial crisis, most traditional lenders have taken on a more conservative approach that consists primarily of avoiding risk by applying a strict set of criteria to mortgage applications. Due to the complexity of their financial arrangements, over one in ten HNWIs have had their mortgage application rejected since 2009.

However, this isn’t simply a source of frustration for the individuals who miss out. Property markets, in particular, take a hit when buyers and investors can’t access the finance they need to make new acquisitions or leverage existing assets.

Navigating the Regulatory Environment

Since 2008, lenders have generally sought to minimise the risk of defaults by strictly adhering to a set of narrow criteria that are typical of individuals with solid finances. This includes evidence of a full employment history, record of outstanding debts, as well as full disclosure of sources of regular income. While lenders have a clear rationale for adopting this practice, it has been detrimental to HNWIs who don’t traditionally have what most high street banks would deem a conventional income structure. Indeed, many derive their wealth from a financial portfolio that is split across many different asset classes and jurisdictions.

Moreover, legislative changes introduced in the aftermath of the financial crisis have created a regulatory environment that limits the ability of high street lenders to provide mortgages for certain individuals, even if they’re very wealthy.

Most notably, the 2014 Mortgage Market Review requires lenders to implement a financial stress test. This means that lenders have to be satisfied that prospective borrowers have sufficient and reliable income, because defaults are less likely from borrowers whose finances are stable and predictable.

Of course, the intended aim of these measures was to ensure that providers do their due diligence before issuing mortgages and this has not, in of itself, been a negative. Indeed, some commentators even credit the legislation with helping to restore market confidence after the dog days of 2008-9.

How do these changes disadvantage HNWIs?

However, the resulting caution has caused problems for a number of different stakeholders within the UK property market including property investors and buy-to-let landlords. This decreases demand for London prime property because many likely buyers are limited by their inability to secure a mortgage in a timely manner as and when attractive investment opportunities arise.

This adds to the frustration many HNWIs experience during the mortgage process. BML’s aforementioned research found that 79% bemoan the restrictive tick-box focus many traditional lenders adopt when assessing mortgage applications. Indeed, this failure to properly consider an individual’s personal circumstances has caused 67% of HNWIs to lose confidence in the ability of high street banks to provide a satisfactory service.

HNWIs are often denied because they don’t depend on employment for a regular income. Indeed, 38% say they struggle because they do not receive a standard monthly pay cheque. Matters are complicated further because a significant portion of many individuals’ wealth cannot be readily liquidated: 44% of those surveyed by BML said they find it inherently difficult to secure a mortgage because their capital is tied up in existing real estate investments.

In effect, HNWIs require lenders who will provide them with credit on the latent strength of their existing portfolio. This means seeking out providers who specialise in catering to the needs of the wealthy and ultra-wealthy. This can be a long, laborious process, particularly given the proliferation of products and providers over the last decade. According to data provided by Mortgage Brain, between 2016 and 2018, an additional 4,212 products were introduced into the residential mortgage market.

This means a greater role for brokers in guiding their clients towards the best mortgage. We found that 73% of HNWIs currently rely on brokers and the more specific an individual’s requirements, the more useful intermediaries become. Brokers would do well to guide their clients towards lenders who are capable of providing a bespoke service and are qualified to properly address applications from individuals with complex financial arrangements.

The need for sensitivity

While it may come as a surprise that some of the UK’s wealthiest people often find themselves disadvantaged when it comes to mortgage applications, it’s not hard to see how a rigid focus on certain metrics is incompatible with the financial situation of many HNWIs. Indeed, these are people with unique and complex financial profiles that require sensitivity and expertise during the assessment process.

At BML we’ve adapted our processes over many decades to be sensitive to the needs of borrowers and investors with a range of different financial profiles. By turning to lenders who are experienced in serving the needs of the wealthy and ultra-wealthy, you mitigate against the possibility of your financial situation being misunderstood, thereby giving you the best chance of getting the outcome you desire.

Ultimately, it’s only by partnering with the right provider that HNWIs and property investors give themselves the best possible chance of financial success.


Butterfield Mortgages Limited is part of the Butterfield Group and a subsidiary of The Bank of N.T. Butterfield & Son Limited. Butterfield Mortgages Limited is a London-based prime property mortgage provider with a particular focus on the needs of UK and international HNWIs.

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