The private banking sector has traditionally dominated the market for property loans of £1 million and above.
It was nearly impossible to secure mortgages without assets under management ('AUM') until recently. Generally, banks would require that borrowers put assets equalling at least 25% of the loan value under management with the bank. Borrowers pledging AUM provided lenders with a form of collateral in return for the bank funding a property loan, giving the bank more comfort.
However, today, there is more competition among lenders, given the recent influx of institutions that can offer high-value mortgages in a space that used to be exclusive to private banks. As more lenders have entered the market and borrowers have more choices of funding, private banks have had to adapt their approach. As a result, where AUM used to be a non-negotiable requirement, today, many banks will consider offering "dry lending" – mortgages without AUM.
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When banks required AUM as standard, the process – and maths – was relatively simple. For example, if you needed a mortgage of £1 million, the bank would usually require that you transferred at least £250,000 to the bank’s asset management division. This way, if you were to encounter financial difficulties during the mortgage term, the bank would effectively have at least £250,000 in managed assets to fall back on. It’s also worth noting that private banks like to offer a rounded service for high-net-worth and ultra-high-net-worth individuals. Requiring borrowers to place assets under management has traditionally helped banks cultivate long-term relationships with their clients.
Recently more commercial banks have started offering mortgages in the million-pound-plus range. With more competition from other lenders, private banks have had to become more flexible with regards to their requirements for AUM.
The term dry lending relates to preferential lending that does not require assets to be held under the management of the funding provider. You may have assets held with other banking groups, and these will be taken into account when calculating the best loan interest rate available. However, at no point are you required to move these assets to the funding provider.
Dry lending is particularly advantageous because all your assets (wherever they are held) can be considered when looking at affordability ratios and repayment schedules.
With access to more than 500 lenders, Enness has access to all the banking groups that offer mortgages with and without AUM. Enness is perfectly positioned to take advantage of competition between commercial, challenger and private banking groups and negotiate dry lending wherever possible.
Since 2007, Enness has built up a network of commercial, challenger and private banks who regularly offer large mortgages without assets under management.
Dry lending will not be a possibility for everyone. You will need to have significant (often liquid) assets that offer lenders comfort in your ability to repay your mortgage. Lenders will also look at your profile, financial background and how much risk they associate with lending to you for this specific property purchase.
How you present your case – and who you present your case to – is also paramount. Dry lending can be an option if you approach lenders directly, but most prefer introductions from parties like Enness. Some lenders will consider you for dry lending without an introduction but accessing the right team and presenting your case is a challenge if you are not used to negotiating this specialist type of finance. Most banks will always prefer to have assets under management if they can, and how you present yourself will be central to how easy (and in some cases if) dry lending is a possibility.
You can use stock portfolios, property assets and other collateral to secure the best interest rates and repayment terms without AUM. As with most high-value loans, there is no one size fits all for this type of finance. However, Enness will build an offer around your circumstances, ensuring your property finance package meets your requirements and situation.
The banks invest in AUM. You usually have a choice between an advisory mandate where the bank advise you on the choice of the investment or a discretionary mandate porfolio, where the client chooses a pre-made portfolio based on his risk appetite.
Banks can provide with financial options by offering structured products, facilitating access to funds, and implementing diversified investment strategies, adding substantial value to your portfolio.
Enness are experts in utilising competition between lenders to your best advantage, sourcing the best deal for you, no matter how much you want to borrow. The team will be happy to talk you through your options for a mortgage without AUM, without any obligation to take things further.
Schedule A CallbackThe UK is home to one of the most liquid, competitive, and complicated mortgage markets in the world.
There are hundreds of mortgage providers who lend in the UK, from major international banks to niche building societies and alternative lenders. Each lender has their own specialisation and position in the market where they excel. They also have lending criteria, interest rates, processes and oddities which are specific to them.
The UK has a considerable number of lending channels. There are regulated mortgages, unregulated mortgages, buy-to-let finance, bridging finance, commercial mortgages and more. It’s easy to see why the lending market is so complicated. The UK’s finance options are plentiful.
There are huge pools of liquidity (some of it incredibly cheap) and you can enjoy flexible lending terms. If you are a foreign national, expat, a high-net-worth individual, are self-employed, have significant assets but relatively low taxable income or anything in between, the UK mortgage market will have an option for you.
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