The practice of borrowing against investment portfolios, known as Lombard lending, is increasingly being used by homebuyers beyond the ultra-wealthy to finance property purchases. Originally associated with super-prime mortgages on homes valued at over £10 million, this form of asset-backed lending is now accessible to a broader range of buyers, providing a flexible alternative or complement to traditional mortgages.

Lombard loans involve borrowing against assets such as shares, bonds, or other investments, a system dating back to medieval Italian banking practices. Private banks including Coutts, HSBC, and Goldman Sachs offer these loans, often approving them within a matter of days. This method allows buyers to leverage their investment portfolios to enhance their purchasing power or bridge financing gaps.

In the current housing market, where properties may take longer to sell, Lombard loans can help buyers secure new homes without having yet sold their existing ones. According to Ann-Marie Atkins of the wealth management firm Evelyn Partners, such loans enable buyers to act quickly and confidently, accessing additional funds when timing is critical. This financing approach is not limited to the UK market; it can also be used to acquire international properties, such as homes in Tuscany or Alpine chalets.

Hugo Thistlethwaite, formerly head of international residential at Savills and now leading Occam Advisers, highlights the advantage Lombard loans offer in competitive bidding situations. Borrowers can present themselves as financially ready and expedited access to funds may grant early viewing opportunities or off-market deals.

Lombard lending is evolving with the inclusion of digital assets as collateral. John Busby from Traverse International Finance, part of Knight Frank, notes that banks are increasingly accepting cryptocurrencies as part of their lending criteria. Investors may borrow directly using crypto as security, converting borrowed assets into cash for property purchases.

Demand for such loans is rising in the UK. Brown Shipley, a wealth manager, reported that the number of Lombard loans nearly doubled last year. Busby states that inquiries and transactions involving these loans are growing steadily, though higher interest rates are currently tempering demand. Fiona Watts, managing director of International Private Finance, notes significant interest in loans between £1 million and £3 million from individuals who may not qualify for private banking services but possess substantial investment portfolios.

Experts caution prospective borrowers to consider several factors before pursuing Lombard loans. Paul Welch of Million Plus advises against simply selecting the lowest headline interest rate, as private banks often require management of the portfolio securing the loan, which can incur fees reducing overall savings. Currency risk is another important consideration, especially when financing international properties with loans in different currencies, a scenario that can increase repayment costs if exchange rates move unfavorably.

Busby also underscores the importance of verifying the lender’s credibility and liquidity, warning against institutions that might lack sufficient capital to fulfill loan commitments. Borrowers are urged to conduct thorough due diligence to avoid situations similar to the recent collapse of Market Financial Solutions, a UK mortgage lender whose failure led to financial difficulties for some high-net-worth clients.

As the property market evolves, Lombard lending is gaining traction as a viable financing tool for a diverse range of buyers, provided they approach it with a clear understanding of its risks and costs.