Description
Introduction
The high value mortgage market in the UK has exhibited strong growth in recent years, significantly outperforming the overall market. Lenders are becoming increasingly attracted to this sector, as it provides access to lucrative income streams, low risk borrowers, and their assets.
Features And Benefits
• Measures the size of the market for high value mortgages.
• Uses results from Datamonitor’s Global Wealth Managers Survey to assess the characteristics and behavior of high net worth consumers.
• Assesses the different strategies employed by lenders operating in the high value mortgage market.
• Describes the ways in which lenders and brokers can reach out to and service high value borrowers.
Highlights
The market for high value mortgages is growing, along with the number of high net worth individuals. Strong demand for high value properties helped to fuel a 41% increase in high value gross advances in 2010. Gross lending growth in this sector is predicted to comfortably outstrip growth in overall mortgage market over the next five years.
High net worth borrowers in the UK are an attractive target for lenders, as they possess substantial amounts of liquid assets that can be used as security. As such consumers prefer dealing with just one provider, there is a high probability that they will transfer their assets to their mortgage provider for wealth management purposes.
A variety of providers are now offering high value mortgages. Private banks are leading the way, with some focusing on providing a fully integrated and individually tailored lending and wealth management service. Mainstream providers still need to develop their offerings to accommodate the diverse needs of these borrowers.
Your Key Questions Answered
• What strategies should you employ to attract high value borrowers?
• How big is the market for high value mortgages?
• How quickly will high value lending increase over the next few years?
Table of Contents
Executive Summary
Datamonitor predicts strong growth in high value gross lending over the next five years
Datamonitor expects high value gross advances to rise to £38.4bn by 2015 under its neutral forecast
The optimistic forecast sees high value gross lending reaching £45.9bn by 2015
The pessimistic forecast predicts high value gross lending of £28.3bn by 2015
HNW consumers represent a good prospect for high value mortgage providers
Most HNW assets are held in easily liquidated assets which can be used as security for mortgages
Private banks and mass market providers employ different approaches towards lending
Private banks have plenty of experience in serving HNW borrowers
Mainstream lenders' high value offerings are less well developed at present
There is scope for lenders to bridge the gap between private banks and mainstream providers
Intermediaries are a valuable distribution channel for high value mortgages
Brokers play an important role in placing HNW clients with providers
OVERVIEW
Catalyst
Summary
MARKET
The potential market for high value mortgages continues to grow
The number of individuals with incomes in excess of £100,000 has returned to growth
There has been a huge increase in the number of consumers with assets of £300,000 or more
Around a fifth of eligible consumers currently have a high value mortgage
Demand for high value residential property has proved resilient
Overseas buyers helped to drive a significant recovery in high value property sales in 2010
Growth in high value property sales has outstripped the general market in recent years
Prices in parts of London have resisted the falls seen in the wider property market
Prospects are good for continued growth in high value gross lending
Gross advances in the high value mortgage market grew strongly in 2010
High value loans are accounting for an increasing share of the overall mortgage market
Datamonitor predicts strong growth in high value gross lending over the next five years
Datamonitor expects high value gross advances to rise to £38.4bn by 2015 under its neutral forecast
The optimistic forecast sees high value gross lending reaching £45.9bn by 2015
The pessimistic forecast predicts high value gross lending of £28.3bn by 2015
CUSTOMERS
HNW consumers represent a good prospect for high value mortgage providers
Only a small proportion of HNW consumers are young enough for a mortgage
A high reliance on regular income should make mortgage provision relatively straightforward
Most HNW assets are held in easily liquidated assets which can be used as security for mortgages
HNW client demand for mortgage provision is high relative to other credit products
HNW consumers increasingly view mortgages as a fully integrated part of their finances
A high level of brand loyalty makes the acquisition of borrowers a profitable strategy
HNW clients in the UK exhibit higher-than-average loyalty to their financial providers
HNW consumers in the UK are extremely likely to concentrate their portfolio in the hands of one manager
Consumer research suggests that HNW individuals are more optimistic than the rest of the population
COMPETITORS
Private banks and mass market providers employ different approaches towards lending
Private banks have plenty of experience in serving HNW borrowers
Mainstream lenders' high value offerings are less well developed at present
There is scope for lenders to bridge the gap between private banks and mainstream providers
A diverse range of providers is now serving HNW borrowers
Bank of China is capitalizing on the boom in Far Eastern investors
Barclays Wealth employs a holistic approach towards high value mortgage provision
Coutts has recently tightened its lending criteria following a period of strong expansion in lending
HSBC provides customized mortgages to its HNW clients through two outlets
Lloyds TSB is aiming to improve its high value mortgage offering over the next few years
Other high street lenders are cautiously beginning to build a presence in the high value market
DISTRIBUTION AND COMMUNICATION
UK HNW consumers prefer contact with financial providers on their own terms
Most UK HNW consumers desire only annual contact with their providers
HNW consumers in the UK have a strong preference for face-to-face servicing
Communication and contact should be tailored to client needs
Intermediaries are a valuable distribution channel for high value mortgages
Brokers play an important role in placing HNW clients with providers
Brokers in the high value market rely on multiple sources for new business
Appendix
Supplementary data
Methodology
Overall methodology
Sizing the high value mortgage market
Global Wealth Managers Survey 2011
Global Wealth Model methodology
Secondary sources
Further reading
Ask the analyst
Datamonitor consulting
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