For any mortgage borrower, the interest rate matters.
For a high-value borrower, even a relatively small difference in pricing can translate into a meaningful difference in cost. It is therefore entirely reasonable for the rate to form an important part of the decision.
But it should not necessarily be the benchmark by which the entire mortgage is judged.
With high-value borrowing, the better question is often:
What does the client need the mortgage to allow them to do?
Because a facility with the lowest headline rate can become considerably less attractive if achieving it requires the client to compromise on liquidity, flexibility or their longer-term financial plans.
Price And Value Are Not Always The Same Thing
A mortgage rate tells us the price of the borrowing.
It does not tell us whether the structure is appropriate.
Consider a client who expects a significant bonus, business sale or other liquidity event during the mortgage term.
A slightly lower rate may initially appear attractive. But if that facility carries restrictive early repayment provisions, the client could have limited flexibility when the capital becomes available.
Another client may value a longer interest-only term because they want to retain liquidity rather than commit additional capital to the property.
In that situation, a lender offering the lowest rate may not necessarily offer the structure that best supports the client’s wider position.
The comparison therefore needs to go beyond pricing.
Liquidity Has A Value Too
High-value clients often have a choice over how much capital they commit to a property.
They may have sufficient cash or investments to make a substantial deposit or reduce existing mortgage debt.
That does not automatically mean doing so is the most appropriate decision.
Capital committed to a property is no longer immediately available for another purpose.
The client may want to retain liquidity for their business, investment requirements, another property acquisition or simply to maintain flexibility around future opportunities and commitments.
Equally, borrowing more to preserve liquidity creates additional interest costs and potentially greater financial risk.
Neither approach is inherently preferable.
The role of mortgage advice is to understand that trade-off and structure the borrowing accordingly.
Flexibility Can Outweigh A Marginal Pricing Difference
The terms surrounding a high-value mortgage can have significant value.
That may include:
- Early repayment provisions
- Overpayment allowances
- Interest-only availability
- The overall mortgage term
- Portability
- Repayment options
- The ability to accommodate future changes in circumstances
The importance of each will vary from client to client.
Someone expecting to hold a property and mortgage for many years may prioritise certainty.
Another client expecting a liquidity event in 18 months may place considerably more value on being able to repay or restructure the debt.
The lowest rate only represents the best outcome if the terms around it also work for the client.
The Wider Banking Relationship Can Influence The Decision
At the higher end of the lending market, a mortgage can sometimes form part of a broader banking relationship.
Private banks may consider the client’s wider assets, liquidity and banking requirements alongside the property borrowing.
That can create different financing options, but it also introduces additional considerations.
A client may be asked to establish or expand a relationship with the bank, which could include placing assets under management.
That should not simply be viewed as the price of obtaining a mortgage.
The client and their relevant professional advisers need to consider whether the wider relationship is appropriate in its own right, including any associated costs and risks.
For some clients, the broader banking proposition may be attractive.
For others, retaining independence between their borrowing and investment arrangements may be more important.
Again, the mortgage rate alone cannot answer that question.
The Future Refinancing Position Matters
A competitive mortgage today can still create a problem later.
High-value clients often have circumstances that evolve considerably over the life of a facility.
They may sell a business, move internationally, change the way they receive income, reduce their working commitments or restructure their assets.
Lending markets can change too.
A mortgage should therefore be considered not only in terms of how easily it can be arranged today, but the position it could leave the client in when the initial term ends.
This is particularly important for substantial interest-only borrowing.
The repayment strategy and potential refinancing route need to remain credible rather than being treated as questions for another day.
Sometimes Paying More Can Provide Something Valuable
There are circumstances where a client may reasonably choose a facility that is not the cheapest available.
Perhaps it provides greater repayment flexibility.
Perhaps it allows the client to retain more liquidity.
Perhaps the lender has a better understanding of international income or a complex remuneration structure.
Or perhaps the term reduces the likelihood of needing to refinance at an inconvenient point.
That does not mean price becomes unimportant.
It means any additional cost should be considered against what the client receives in return.
Start With The Client, Not The Rate Table
At Henry Dannell, we believe high-value mortgage advice should begin with the client’s wider financial position rather than a comparison of headline rates.
What are they trying to achieve?
How much liquidity do they want to retain?
How might their circumstances change?
What flexibility could they need?
How will the debt ultimately be repaid or refinanced?
Once those questions are understood, pricing can be considered within the right context.
Because for a high-value borrower, the cheapest mortgage and the most appropriate mortgage are not necessarily the same thing.
The rate tells you what the borrowing costs. The structure tells you whether it works.
A mortgage is secured against property. The property may be repossessed if repayments are not maintained. Mortgage availability and lending are subject to individual circumstances, affordability, status and lender criteria. Where investment, tax or legal considerations are relevant, clients should seek advice from appropriately qualified professionals.
