Wealthy business clients are surprisingly under-served by traditional mortgage lenders, where prescriptive box ticking doesn't fit their variable income flows. A challenger bank intends to fill that gap.

Positioning itself as “the bank for entrepreneurs, by entrepreneurs,” UK-based OakNorth is entering the bespoke mortgage market for the wealthy whose uneven income streams often fall foul of high street lending criteria.

The bank's entry into the retail mortgage space will include lifetime tracker rate products, with mortages starting at £500,000 ($653,616). The service aims to deliver quick turnaround decisions on loans and take "a holistic view on applicants’ finances", the organisation said in a statement yesterday.

OakNorth, which since its launch has lent approximately £3 billion, and has about 55,000 savings' customers, said it wants to help HNW individuals and business owners who are not effectively served by retail and private banks. It wants to build a mortgage loan book of £260 million by the end of the year, the equivalent of capturing between 5 and 10 per cent of the market. OakNorth, whose origins date back to 2006, is regulated by the Financial Conduct Authority.

This is the gap left by the UK’s six largest banks that manage around 75 per cent of the retail market but are often not commercially set up to lend to those who are asset-rich but whose income flows are at odds with mainstream lending requirements.

“High-street banks have limited mortgage offerings when it comes to borrowers who don’t have a regular or established source of income, such as the self-employed or business owners. Private banks, on the other hand, tend to have high entry requirements that are unfavourable to most of these individuals,” Ben Barbanel, head of debt finance at OakNorth, said.

“Lenders are typically unwilling to offer bespoke terms for their mortgage products and as a result, more than one in ten business owners in the UK are unable to access the finance they need to purchase their first home,” he added.

It has hired mortgage advisors Kevin Appleton, Matthew McDonald and Mark Howell to roll out the business. Their backgrounds span disputes resolution at the Financial Ombudsman Service and lengthy tenures at RBS Bank, Coutts and Co, and Bank of Ireland.

Bespoke market
The area of HNW mortgages and bespoke financing has a number of players. Last year, this publication wrote about the growth in bespoke mortgage financing reporting on Bermuda-based Butterfield’s expansion in the area after closing down its private banking presence in the UK in 2016. Wealthy clients with complex mortgage needs are served by a relatively small number of banks. Among them are UK-based Arbuthnot Latham, Coutts, UBS and Brown Shipley.

High street banks are getting in on the act as balance sheets improve, with more providing single-digit million mortgages, where previously only private banks were able to step in, Shaun Church, director at Private Finance, a specialist broker in the space, told this publication last year.

On the flip side, private banks are looking for niche areas, such as lending to non-domiciled clients or to those with collateral that is difficult for high street lenders to handle, he said.

“Private banks are having to be a bit less picky about who [clients] they’ll take on because more and more of their old business is being mopped up by the high street banks,” Church said.

Read more reporting on the subject here.