High net worth specialist Enness Private Clients has given its conditional backing to the FSA’s proposals in the Mortgage Market Review (MMR) in particular a more tailored approach for high net worth (HNW) borrowers.
The MMR proposes an alternative approach to HNW because of the complex nature of income and the short terms of most loans (typically five years).
It also suggests the FSA could either ‘disapply’ the mortgage rules to HNW borrowers or allow them to forego the protection of the mortgage rules.
The MMR contains a definition of what constitutes HNW. As its starting point it suggests a gross income of no less than £1million p.a. or net assets of no less than £3 million.
It also recommends that lenders would need to get a declaration from a professional (lawyer, accountant) that states the individual meets this definition.
Under the MMR, HNW borrowers’ affordability can be assessed on an interest-only basis providing there is a realistic and credible strategy for repaying the capital.
Enness believe the FSA has, for the most part, produced a balanced and coherent set of proposals for the HNW borrower. It says that disapplying the standard mortgage rules for HNW makes “perfect sense””. It also believes that borrowers