Dry Lending HNW Mortgages UK

Dry lending is a private bank HNW mortgage arranged without a requirement to transfer assets under management onto the bank’s wealth platform. The mortgage is priced on its own merits at market rate. For HNW borrowers who want to keep their wealth managed independently, dry lending is the only practical route to private bank pricing and underwriting without giving up the wider wealth relationship.

This guide covers which UK private banks currently offer dry lending, how the rate sits against AUM-tied lending, the typical loan profile that fits, and the trade-off in plain numbers.

Definition

What is dry lending in HNW mortgages?

Dry lending is a private bank residential mortgage where the bank lends against the property alone, without requiring the borrower to transfer investable assets into the bank’s wealth management platform. The mortgage stands on its own merits. It is underwritten the same way as a standard AUM-tied private bank loan, with the same manual narrative-driven approach to income and asset profile, but pricing reflects that the bank captures no wider wealth fees from the relationship.

The contrast is with the conventional private bank model. Most UK private banks (Coutts, Weatherbys, Arbuthnot Latham, Investec among them) price residential mortgages preferentially when the borrower also moves £1 million to £3 million plus of investable assets onto the bank’s wealth platform. The mortgage is a vehicle for the wider wealth relationship, and the bank prices the loan keenly because the wealth fees fund the overall economics.

For HNW borrowers who do not want to move their wealth, dry lending is the alternative. The rate is higher than AUM-tied pricing because the bank is not capturing wealth fees, but it is still typically below what the high street will offer on a complex HNW case, and the underwriting flexibility remains. The borrower keeps their existing wealth manager. The bank books a sensible loan. Both sides win, just with a smaller margin to the bank.

Dry lending is regulated residential lending in the same way any other HNW residential mortgage is regulated. It sits within scope of FCA conduct rules, MCOB applies, and FOS access is preserved.

Why dry lending exists

Why do HNW borrowers want dry lending?

The HNW client typically already has a wealth manager. Many have an established relationship that has been managing the family’s investments for years or decades. The wealth manager understands the tax positions, the CGT base costs, the existing wrappers, the trust structures. Moving the wealth to a private bank’s platform to access a mortgage rate concession often means giving up that positioning, with material opportunity costs.

What we have found over the last few years is that more HNW clients ask for dry lending than ten years ago. The reasons cluster into four themes.

Established wealth manager relationship. Independent wealth managers (Brewin Dolphin, Rathbones, Cazenove, Investec Wealth, Coutts itself sometimes as wealth manager, plus dozens of boutiques) have built investment positions the client values. Moving the wealth to a private bank’s lending platform breaks the relationship, triggers CGT events, restarts the IHT clock on gifted positions, and disrupts pension and trust arrangements that have been carefully structured. The opportunity cost of moving £2 million in opportunity terms (lost tax wrappers, CGT realisation, fee structure changes) is frequently above the £25,000 to £50,000 rate saving over a 5-year fixed period.

Optionality preserved. Dry lending leaves the wealth flexible. The client can move assets later if they choose. AUM transfer is one-way in practice. Once the wealth is on the bank’s platform, moving it back is administratively expensive and the rate concession that justified the move usually evaporates at the same point.

Single relationship governance. Some HNW clients deliberately want their lender and their wealth manager to be different counterparties. The argument is governance: keeping wealth advice separate from credit decisions, avoiding the implicit cross-sell pressure that comes with concentrated relationship management. Family offices in particular often run this approach as policy.

Loan size makes the maths work. On a £1 million to £3 million mortgage, the absolute rate saving from AUM transfer might be £30,000 to £80,000 over a 5-year fixed. On a £10 million plus loan, the saving compounds and AUM transfer starts to look more rational. Many HNW borrowers sit in the £1-3m loan band where dry lending is the cleaner economic choice.

UK lender list

Which UK private banks offer dry lending?

The UK private bank market splits into three groups on this question. We arrange across all three.

Private banks that offer dry lending as a standard product. Selected desks at Investec, Hampden & Co, Arbuthnot Latham, and Weatherbys offer HNW residential lending without a hard AUM requirement, particularly for established UK clients with substantial liquid assets evidenced elsewhere. The rate is market rate or close to it, and the case is underwritten on its own merits. These desks are the right starting point for clients who explicitly want to keep their wealth independent.

Private banks that prefer AUM but will lend without. Coutts and Lombard Odier sit in this middle ground. They will lend without AUM transfer, particularly for clients with strong asset profiles and clean credit histories, but the rate will be 0.25 to 0.5 percentage points above their AUM-tied pricing. For clients who do not want the wider relationship, this is still typically competitive against the high street large-loan desks.

Private banks that effectively require AUM. Julius Baer and UBS Wealth Management price mortgages as part of the wider relationship in most cases. Standalone dry lending requests are sometimes accommodated for very large loans where the bank wants the lending business in its own right, but it is not their standard model. For dry lending these are rarely the right first call.

The picture is dynamic. Private banks reassess their lending appetite each year, the desks within banks vary in approach, and individual senior underwriters often have flexibility their published policies do not show. We track the current position with each lender, including who has dry lending capacity right now and who has tightened in the last quarter. Naming the wrong bank at the start of the conversation costs weeks. Naming the right one shortcuts the case.

Rate differential

How much higher are dry lending rates vs AUM-tied?

The typical rate premium for dry lending over AUM-tied lending at the same private bank is 0.25 to 0.4 percentage points. On a £2 million 5-year fixed, that is £25,000 to £40,000 of additional interest over the fixed period. On a £5 million loan, £62,500 to £100,000.

The variance reflects three things. First, the size of the AUM transfer the bank would otherwise capture. A bank that needs £1 million AUM to match the AUM-tied rate will price a 0.25% premium for dry lending. A bank that needs £3 million AUM will price a 0.4% premium. Second, the bank’s overall lending appetite at the time. In quieter quarters the premium compresses; when the desk is busy, it widens. Third, the borrower’s profile. Asset-rich borrowers with strong liquid positions are priced more tightly because the bank’s underwriting risk is lower regardless of whether AUM transfers.

Against the high street large-loan desks (Barclays, HSBC, NatWest large loans), dry lending is usually competitive on rate and significantly better on underwriting flexibility. The high street uses automated affordability models that struggle with complex income. Dry lending from a private bank uses manual underwriting, which is the substantive advantage even when the rate is similar.

Loan profile

LTV, loan size and structures available

Dry lending is most readily available in the £1 million to £15 million loan band. Below £1 million, private bank desks rarely engage at all; the high street HNW desks become the natural route. Above £15 million, dry lending is still possible but the bank wants either AUM transfer or a specific commercial reason for the standalone loan (a known introducer, an existing relationship with a different family member, a clear future-AUM trajectory).

Standard LTV on dry lending runs 75 to 80 percent for clean prime cases. Up to 90 percent is available with selected private banks for the strongest profiles. On loans above £10 million the typical LTV ceiling is 60 to 70 percent, regardless of AUM position. Cross-charge structures using multiple properties as combined security are available and frequently improve the effective LTV.

Loan structures are the same as any HNW residential mortgage. Interest-only with a credible capital event exit (investment portfolio drawdown, RSU vesting, business exit, property sale, pension lump sum) is widely available. Capital and interest. Part-and-part. Terms past standard retirement age where the lender accepts the income source. Fixed rates from 2 to 10 years, trackers, and base-plus products are all offered. The flexibility is the same as AUM-tied; only the rate is marginally higher.

Ownership structures including SPVs (UK and offshore), family investment companies, bare and discretionary trusts are accepted by the specialist private bank desks. Dry lending is not a barrier to non-individual ownership; it is the lender list that narrows when ownership is held through a structure, not the AUM question.

When AUM beats dry

When is dry lending the wrong choice?

Dry lending is not always the right answer. The case where AUM-tied lending beats dry comes down to three factors.

You already have an existing wealth relationship with a private bank. If your wealth is already managed by Coutts, Investec Wealth, or Weatherbys Wealth, and you are happy with that relationship, the AUM-tied rate at the same bank is essentially free money. There is no opportunity cost because the wealth is already there. Take the 0.25 to 0.4% rate saving.

The loan is large enough that the rate saving outweighs the AUM constraint. On a £10 million plus loan, 0.4 percentage points compound to substantial money over a 5-year fixed (£200,000 plus). At that level, even modest wealth manager performance differences and opportunity costs are usually outweighed. AUM transfer becomes economically rational. The threshold varies by case but rule of thumb: above £5 million, look hard at AUM-tied; above £10 million, AUM-tied is usually right unless there is a specific reason not to.

You want the wider relationship. Private bank lending typically comes with concierge service, FX, lending against unlisted holdings, succession planning, family office services, charitable foundation banking. If you would value any of these, AUM transfer is the entry ticket. The mortgage rate concession is the visible saving; the wider relationship is often the actual value.

The case where the maths comes out genuinely close is the £2 million to £5 million loan with an existing independent wealth manager and no strong preference for the wider private bank relationship. There the rate saving from AUM transfer is £25,000 to £75,000 over five years, which roughly balances the typical opportunity cost of moving the wealth. We model both routes for clients sitting in this band and let the specific tax and CGT position drive the answer.

Worked example

£2.5m dry lending case: how the maths actually plays out

We approached three lenders in parallel. The first was the client’s existing high street relationship, a large-loan desk at one of the high street banks. They offered £2.5m at 4.95% on a 5-year fixed, interest-only, 25-year term, with LTV capped at 65% (requiring an additional £100k of deposit). Process timeline: 8 weeks from instruction to formal offer.

The second was a private bank with a clear dry lending product. They offered £2.5m at 5.20% on a 5-year fixed, interest-only, 25-year term, with 75% LTV available (so the original £1.5m deposit was sufficient). Process: 5 weeks. Lender arrangement fee 0.55% (£13,750).

The third was a building society HNW manual underwriting desk. They offered £2.5m at base + 1.85% on a tracker (current rate 5.60%), 25-year interest-only, 75% LTV. Process: 5 weeks. No arrangement fee.

The client picked Option 2, the private bank dry lending product. Rate cost over 5 years on £2.5m interest-only at 5.20%: £650,000. The high street’s 4.95% would have cost £618,750, a £31,250 saving. But the high street required an additional £100k deposit which had to come from the same wealth manager pool, plus the 8-week timeline risked the purchase price (the client was in a competitive bid situation). Net of process risk and deposit constraint, the private bank dry lending option was the better overall fit despite the higher headline rate.

The takeaway: dry lending pricing is not always cheaper on the headline rate than mainstream large-loan desks. It is the LTV flexibility, manual underwriting and case-by-case structuring that justify the slightly higher rate.

Process

How Fox Davidson identifies dry lending lenders

Identifying which UK private banks have current dry lending capacity is not something you can do from a public website. The published rates and AUM expectations are rarely accurate to the day. The information lives in conversations with senior underwriters and relationship directors, and it shifts quarter by quarter as banks rebalance their books.

Our standing process for HNW dry lending cases works in three stages.

Pre-approval profile assessment. Before any lender is approached, we map the client’s profile against current desk policies. Loan size, asset profile, income complexity, residency, ownership structure, exit strategy. This eliminates 60 to 70 percent of the lender list immediately based on hard criteria mismatches.

Live capacity check. For the remaining lenders, we sound out current capacity directly with the senior underwriter or relationship director. Some weeks a desk is closed for dry lending applications because the wealth platform is being prioritised. Other weeks the same desk has aggressive new-money targets and is pricing dry lending keenly. Catching the right moment matters.

Parallel approach with case packaging. Once we have identified two to three lenders that match the case profile and have current dry lending capacity, we package the case for each lender’s specific internal criteria. The same client’s income narrative reads differently to a private bank that uses two-year averaging than to one that takes the latest year only. We position the income, asset and exit strategy story for the lender we are speaking to. The case structuring matters as much as the lender selection.

Most dry lending cases we arrange complete within five to eight weeks of initial instruction. Where speed is the constraint, we have completed in four weeks via the specialist HNW desks. Cases involving offshore structures, foreign currency income or trust ownership run eight to twelve weeks because of the additional documentation.

FAQs

Frequently asked questions