A private bank is a bank that provides banking, lending and wealth management services to individuals with substantial income or assets. Rather than offering standard products to a mass market, it works with a smaller number of clients and tailors its services to each one.

Ask a private bank about a mortgage and the phrase "wider relationship" will often appear early in the conversation.

It is one of the most commonly used terms in high-net-worth lending and one of the least clearly explained. Some clients assume it means opening a current account. Others assume it means handing over their entire investment portfolio. In reality, it can mean either, or something in between, and understanding what a bank actually expects is central to judging whether its offer is the right one.

Why private banks think in relationships

A high street lender typically treats a mortgage as a standalone product. It assesses the application, agrees a loan and earns its return from the interest margin.

Private banks work differently. A residential mortgage on its own may not be especially profitable for them, particularly given the time involved in individually underwriting complex cases. What makes the lending worthwhile is the client's broader business with the bank.

That is why private banks can often offer things mainstream lenders often cannot. Larger loans, interest-only as standard, flexible affordability assessments and a willingness to look at wealth rather than just income. The mortgage is frequently the entry point to a relationship rather than the relationship itself.

There is also a practical benefit for the bank. A client whose finances it manages is a client it understands. It can see how money moves, what assets are held and how the client's position develops over time, which gives it more confidence in lending.

What a relationship can include

In practice, a wider relationship is usually built from some combination of the following.

• Assets under management. This is the most common and most significant element. The bank asks the client to place investments with its wealth management team, either on a discretionary basis, where the bank makes investment decisions, or on an advisory basis. The expected amount varies widely between banks and between cases.

• Deposits and cash. Holding cash balances with the bank, whether in current accounts, deposit accounts or notice accounts.

• Day-to-day banking. Moving salary, dividends or other income into accounts with the bank so it becomes the client's main banking provider.

• Other lending. Additional facilities such as borrowing against an investment portfolio, often called a Lombard facility, or lending on further property.

• Business and family connections. Banking for a company the client owns, or relationships with family members, trusts or family investment structures.

Not every bank requires all of these, and not every client will offer them. The combination is usually a matter of discussion.

Relationship requirements vary considerably

There is no standard rule across the private banking market.

Some banks will lend without requiring any investments to be placed with them, particularly where the client has strong income and straightforward circumstances. Others treat assets under management as a firm condition of lending. Many sit somewhere in between, where the relationship is not strictly required but directly affects the terms offered.

The expectation can also depend on the loan itself. A larger loan, a more complex income position or a request for flexible terms will often come with a greater relationship expectation than a simple case.

How the relationship affects the terms

The relationship often shapes the offer in three ways.

• First, it can affect whether the bank lends at all. For some cases, particularly those relying on assets rather than income, a meaningful relationship may be what allows the bank to proceed.

• Second, it can affect pricing. Interest rates at private banks are frequently linked to the value of the overall relationship, with better pricing available to clients bringing more business to the bank.

• Third, it can affect structure. Loan size, interest-only terms, flexibility on repayment and the approach to affordability can all be influenced by what else the client holds with the bank.

What clients should consider

A relationship offer should be judged as a whole, not by the mortgage rate in isolation.

• The cost of investment management. A lower mortgage rate may be offset by management fees on the portfolio. The true cost assessment should include both.

• Ongoing conditions. Some facilities include requirements to maintain a certain level of assets with the bank throughout the term. It is important to understand what happens if the portfolio falls in value or the client wishes to withdraw funds.

• Moving existing investments. Transferring a portfolio may involve selling and repurchasing holdings, which can have tax consequences. Independent tax and investment advice should be taken before any decision.

• Concentration. Placing borrowing, cash and investments with one institution can be convenient, but some clients prefer to keep their affairs spread across providers.

• Future flexibility. A relationship can be harder to unwind than a standalone mortgage. Refinancing elsewhere later may mean reconsidering the investment arrangements too.

None of these are reasons to avoid a relationship. For many clients, consolidating their finances with a private bank is exactly what they want. The point is that the decision should be made with the full picture in view.

The role of the broker

Because every private bank takes a different approach, the same client can receive very different proposals from different banks. One may require a substantial portfolio transfer. Another may offer comparable terms on the strength of income and deposits alone.

Part of the value of specialist advice is knowing which banks are likely to suit a particular client before any approach is made, and presenting the case in a way that reflects what the client is realistically able and willing to offer.

A relationship, not a transaction

"Wider relationship" is not a hidden catch. It reflects how private banks are built: around clients rather than products.