What is a Lombard loan and can it help you buy a property?

Lombard loans are becoming more widely discussed among wealthy property buyers, investors and private banking clients. They can be useful, but they are very different from standard residential mortgages and need to be handled carefully.

A Lombard loan is a form of borrowing secured against liquid assets, such as shares, bonds, investment funds or other marketable securities. Instead of the bank taking security over a property, it lends against an investment portfolio.

The aim is simple: the borrower can access cash without selling their investments.

How do Lombard loans work?

A private bank or wealth manager lends a percentage of the value of an investment portfolio. The amount available depends on the type of assets held, the currency, the volatility of the portfolio and the lender’s appetite.

Cash, government bonds and lower-risk funds may support higher borrowing levels. Concentrated shareholdings, single stocks, alternative investments or volatile assets may support lower borrowing levels, or may not be acceptable at all.

The investments are usually held with, or transferred to, the lender or wealth manager so they can be used as security for the loan.

Who uses Lombard loans?

Lombard loans are commonly used by high-net-worth clients, entrepreneurs, investors, private equity professionals, business owners and international buyers.

They may be used to:

• Raise cash without selling investments

• Fund part of a property purchase

• Act quickly on an off-market or time-sensitive purchase

• Bridge the gap while waiting for another property to sell

• Buy a UK or overseas property

• Support a larger deposit alongside a mortgage

• Provide short-term liquidity

• Avoid selling investments at the wrong time

Some clients use Lombard lending because their wealth is tied up in investments rather than income. Others use it because they need speed and flexibility.

Which banks offer Lombard loans?

Lombard lending is usually provided by private banks, investment banks and wealth managers rather than mainstream mortgage lenders.

Banks and wealth managers that may offer Lombard or securities-backed lending include Coutts, HSBC Private Bank, UBS, Goldman Sachs, RBC Brewin Dolphin, Evelyn Partners, Quilter Cheviot, Brown Shipley, Julius Baer and Lombard Odier.

Availability will depend on the client’s assets, relationship with the bank, portfolio size, risk profile and whether the lender wants to manage the investments.

Some private banks may offer Lombard lending only to existing clients or clients willing to transfer assets under management. This is important because investment management fees, custody charges and wider banking costs can affect the overall value of the arrangement.

The Financial Times reports that last year, the number of Lombard loans to clients by UK wealth manager Brown Shipley more than doubled and “were it not for higher interest rates, demand would be higher still.”

Coutts’ investment-backed lending allows clients to borrow against eligible investments to unlock liquidity without selling their portfolio. The private bank's facility can help clients move quickly when funding acquisitions, new ventures or family support, while preserving their long-term investment strategy. Coutts borrowing can usually be structured as an overdraft, with loans also available, and the process can be completed in days subject to approval because there is no property valuation requirement.

To qualify, clients must hold more than £1 million in investments with Coutts, be at least 18 and understand the risks. Coutts says the facility is available in sterling, euros, US dollars, Swiss francs and Japanese yen, with no legal, valuation or arrangement fees. Key risks include margin calls if investment security falls, currency risk, magnified losses if borrowing to invest, and the fact that investment values can fall as well as rise. Borrowing in a currency that’s different to the home you’re buying is a big currency risk.

How are Lombard loans different from mortgages?

A mortgage is secured against property. A Lombard loan is secured against investments.

With a standard mortgage, the lender assesses income, affordability, credit history, deposit, property value and loan-to-value. The mortgage is usually designed to be repaid over a longer term, often 25 to 35 years.

With a Lombard loan, the lender focuses heavily on the investment portfolio being pledged as security. The loan can often be arranged more quickly than a mortgage, especially for established private banking clients, but it is more exposed to market movements.

If the value of the investments falls, the lender may ask the borrower to add more security, repay part of the loan or sell assets. This is one of the biggest risks.

Why use a Lombard loan instead of selling investments?

The main point of a Lombard loan is liquidity.

A client may not want to sell investments because they believe the portfolio will grow, they want to avoid crystallising a gain or loss, they need to preserve a long-term investment strategy, or they want cash quickly.

For example, a buyer may want to secure a London property before their existing home sells. A Lombard loan could allow them to access cash against their investments and move quickly, rather than waiting months for a sale to complete. In this scenario, a bridging loan may be more suitable. 

Can Lombard loans help with property purchases?

Yes, Lombard loans can sometimes help property buyers, particularly those buying high-value properties or those with significant investments.

They may be used alongside a mortgage to increase the deposit, reduce the loan-to-value, or provide short-term funding. In some cases, they may help clients make a stronger offer because funds can be accessed more quickly than a conventional mortgage.

However, Lombard loans are not a replacement for proper mortgage advice. They are usually more suitable for wealthy clients with sizeable liquid investment portfolios and a clear repayment strategy.

Are Lombard loans easy to refinance onto a normal mortgage?

Sometimes, but not always.

A Lombard loan can often be refinanced onto a standard mortgage if the borrower has enough income, the property meets lender criteria and the loan-to-value is acceptable. This can work well where the Lombard loan was used as short-term bridging-style finance.

However, refinancing can be difficult if the borrower does not have enough provable income, wants a very large mortgage, has complex foreign income, is buying an unusual property, or has borrowed too much against assets.

Borrowers should not assume they can always replace a Lombard loan with a normal mortgage later. The exit strategy needs to be checked before the loan is taken.

What are the risks of Lombard lending?

Lombard loans can be flexible, but they are not risk-free.

The main risks include:

• Investment values falling

• The lender asking for extra security

• Assets being sold to reduce the loan

• Currency risk if the loan and property are in different currencies

• Variable interest rates increasing

• Investment management fees reducing the benefit

• Difficulty refinancing onto a standard mortgage

• The lender changing its appetite or lending terms

Borrowers should also understand whether the loan is repayable on demand and what happens if the portfolio value drops sharply.

Aaron Strutt, product drector at Trinity Financial, says:

“Lombard loans can be extremely useful for wealthy clients who have investment portfolios but do not want to sell assets to buy a property. They can provide speed and flexibility, particularly where a client wants to buy before selling another home or needs to move quickly on an off-market purchase.

“However, they are very different from normal mortgages. The loan is secured against investments, not the property, and if markets fall the lender may ask for more security or repayment.

“The key question is always the exit strategy. Some clients plan to refinance the Lombard loan onto a standard mortgage, but that only works if they meet mortgage affordability and lender criteria at the time. It is important to take advice before relying on that route.”

Why use Trinity Financial?

Trinity Financial works with high-street lenders, building societies, private banks and specialist finance providers. This means our brokers can compare whether a standard mortgage, private bank mortgage, bridging loan or Lombard-style facility is most suitable.

For some clients, a mainstream mortgage will be cheaper and simpler. For others, a private bank or asset-backed lending facility may offer more flexibility.

Trinity Financial can help clients understand:

• Whether a Lombard loan is suitable

• Which lenders may consider their assets 

• If it is possible for you to get a standard mortgage

• Whether a normal mortgage would be cheaper

• How to structure the deposit and borrowing

• Whether the loan can be refinanced later

• What risks need to be considered before proceeding

Speak to Trinity Financial

If you have a significant investment portfolio and are looking to buy or refinance a property, speak to Trinity Financial before approaching lenders directly.

Our brokers can review your income, assets, property plans and repayment strategy to help work out whether a Lombard loan, private bank mortgage or conventional mortgage is the right option.

Call Trinity Financial on 020 7016 0790 or book a consultation. Please state that you are looking for Lomard lending in your email, call or website enquiry, and speak to one of our company directors Jed, Scott or Anthony. 

The information contained within was correct at the time of publication but is subject to change. It is for general information purposes and is not advice.

Your mortgage is secured on your property. Your property may be repossessed if you do not keep up repayments on your mortgage. Investment-backed borrowing can put your investments at risk if values fall or lending terms change.