Evolving priorities for HNWs
Despite widespread concern about a crash in the property market, research suggests house prices around the world have risen throughout the pandemic. According to research from Knight Frank’s Wealth Report, Auckland took the lead with an 18% upswing in property prices, while in the UK, Oxford and the home counties experienced strong sales as buyers sought more space away from the major cities. While rising house prices affect all buyers, the HNW segment often faces further obstacles in terms of finding a lender who can understand their frequently complex income structures.
Market Conditions
The UK market was buoyed by the Stamp Duty holiday after initial fears about the effect of lockdown on house sales. At Harpenden, we’ve experienced a surge in applications as buyers rush to
complete before the holiday ends. Our underwriters have also noticed an increased trend of HNWs coming to us with higher LTV requests in addition to the ongoing issue of finding a lender who can accurately assess their varying levels of complex income. As the UK’s self-employed and freelance sector is expected to continue growing both throughout the pandemic and beyond, such issues are likely to persist.
Growing priorities for HNWs
Matt Connor, Head of Business Partnerships at Knight Frank Finance, a leading London-based HNW brokerage, has also noticed emerging trends in the HNW housing market. He cites the demand for higher LTV mortgages in this sector as indicative of a growing requirement from buyers wanting to take advantage of low mortgage interest rates in lieu of liquidating other performing assets.
Connor believes that the greatest frustration HNWs face in acquiring a mortgage is finding a lender who will analyse their individual income patterns and come to a solution based on a unique set of circumstances and needs. He states “Our prime concern in HNW applications is finding a lender who can determine an accurate portrait of risk.”
In terms of Knight Frank’s experience in placing successful applications, Connor points out that it’s vital for lenders to consider the individual requirements of each client. The most successful transactions are those where the lender has taken time to understand both the client and their business and, from this, can determine why the individual income is structured in a certain way. Important factors to consider include business culture, the client’s track record and their additional assets alongside their income.
Changes in the property landscape
The pandemic has also led to a change in the type of property in demand as HNW buyers seek a move to “lifestyle homes” according to Connor. In addition to gardens and outdoor spaces, buyers are now assessing how they can use the indoor space in a property. While an escape from lockdown seems just over the horizon, the memories of crowded spaces and makeshift home offices will prevail long after the pandemic is over.
Solutions for HNWs
Specialist lenders will need even more flexibility as the economy adapts to the post-pandemic environment. Changes to buyers’ financial situations, such as a rise in self-employed workers, means there will need to be more time spent assessing complex income structures and looking at cases on an individual basis. However, in our experience, if you have the time to work through the analysis on a case and explore all possible solutions, there’s often a successful conclusion. A personalised, highly analytical and creative approach to lending is key to supporting both broker and client through the volatility of the year ahead.
Craig Middleton, Mortgage Sales & Distribution Manager, Harpenden Building Society