View more on these topics

BBA says exclude HNW clients from new LTI cap

The British Bankers’ Association has urged the Bank of England to exclude high-net-worth clients from its new LTI cap.

From October, lenders must limit the volume of loans they originate above 4.5 times income to 15 per cent of new lending.

While the BBA says it “broadly supports” the limit on high-LTI lending, it says the new rules could negatively impact private banks, who typically serve high net worth clients whose ability to repay debt is based on assets and income combined, as opposed to just income.

BBA policy adviser Nicholas Smith says: “We have some serious concerns about what such legislation would mean for a small, but increasingly important part of our financial services industry – private banks and high net worth customers.

“These individuals typically borrow differently to most customers and have more intricate finances than most of us.”

Smith says enforcing the LTI cap, in its current form, would unfairly penalise private banks and would stifle competition.

He says: “The BBA and policymakers want to see more competition in the banking industry. This measure could leave some private banks at a distinct disadvantage to their peers both domestically and internationally.”

As a result, the BBA says it would like to see high net worth individuals excluded from the LTI cap, saying: “We hope that the Prudential Regulation Authority has taken another look at these proposals when it issues its final rules next month.”

The new regulations were first recommended at the Financial Poilcy Committee’s June meeting and the Building Societies Association last month urged policymakers not to make the cap a permanent fixture in the mortgage market, arguing it would be a “backwards step”.

The Bank of England will also require lenders to stress test borrowers against a 3 per cent rise in the prevailing interest rate at the point of taking out the loan.

Recommended

Andrew Doyle cropped for comment

Capita appoints Ward as non-executive chairman

Capita Mortgage Services has appointed Home Funding chief executive Tony Ward to the role of non-executive chairman. Ward joined the board of Capita Mortgage Services, formerly known as Crown Mortgage Management, on 11 September. He previously served as chief executive at both Britannic Money and Mortgage Trust between 1990 and 2003, while prior to that […]

Richard-Sexton-500x320.jpg

Back on track after a dodgy summer

It feels like we have just sailed through a brief and unexpected lull in lending activity, with some conflicting indicators about the likely direction of travel.  Whilst the industry is well used to a summer down turn, in August this year it seemed there was a more noticeable fall away.  Dependent on which set of […]

Martin-Reynolds-700.jpg

New calls for lenders to hike proc fees

Industry experts have renewed calls for lenders to pay higher procuration fees due to the additional work involved in processing cases post-MMR. Taking part in a panel session at the Financial Services Expo in London today, experts suggested lenders should recognise the work brokers do by paying more commission. Mortgages for Business managing director David […]

Newsletter

News and expert analysis straight to your inbox

Sign up