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MMR: HNW net income limit slashed from £1m to £300K

The FSA has slashed the income limit of a high-net worth mortgage customer from £1m to £300,000 and formerly recognised that borrowers in this bracket will be able to opt out of receiving advice.

In its consultation paper last year the regulator defined a HNW borrower with a minimum annual net income of £1m and net assets of £3m, and also proposed the advice opt-out, provision for interest-role up mortgages and a tailored approach to disclosure.

Its definition of a HNW client is different to the one the regulator put forward in its consultation paper on unregulated collective investment schemes in August this year. In that paper it defined HNW as anyone with net income of £100,000 and net assets of at least £250,000, but it is choosing to apply a different definition of HNW in the mortgage market.

In today’s final rules it states: “Our changed approach, in the light of the market feedback, recognises that there is a very small subset of genuinely wealthy customers, whose wealth is significantly above average.

“This level of wealth gives these customers specific advantages, in particular, a considerably reduced risk of becoming homeless in the event that they experience financial difficulties.

“The HNW definition for mortgages will therefore exclude most customers, and will ensure that the tailoring is targeted at the most wealthy.”

Lenders will still have to assess the affordability of HNW affordability customers, obtain evidence of income when basing their affordability assessments and take account of future interest rate rises.

And the FSA’s interest-only rules continue to apply in their entirety, as the FSA believes that the interest-only rules are flexible enough to be adapted to the needs of different types of customers, including HNW mortgage customers.



Banks ‘deserve thanks’ for showing forbearance as borrowers struggled

FSA managing director of prudential regulation Andrew Bailey last week claimed that the UK’s banks deserved a “thank you” for the way in which they have helped thousands of borrowers in financial difficulty to avoid losing their homes. Since the financial crisis, banks have openly employed forbearance measures, like payment holidays, a temporary reduction in […]

Carby’s Caerus Capital Group buys up Paradigm Financial Advisers

Keith Carby’s Caerus Capital Group last week announced it was buying Paradigm Partner’s network arm Paradigm Financial Advisers. The deal will see Caerus Capital Group take over the network’s 370 advisers across 110 firms, subject to FSA approval. Caerus Capital Group has around 140 advisers, all of which are currently appointed representatives of PFA. Caerus […]

Kevin Paterson

Before-the-event LEI is worth it

Add-on covers can be valuable commission earners for brokers and valuable products for consumers, but changes resulting from the Jackson reforms and the investigation by the Office of Fair Trading will see these products, and the way in which they are sold by brokers, change. Ultimately the changes seek to ensure that customers are treated […]

Europe: banking on a recovery

Neptune video: Europe — banking on a recovery

Arguing that the eurozone crisis is over, watch Rob Burnett, head of European equities at Neptune, discuss the sectors that he’s investing in to harness the recovery. 

In the video, Burnett addresses the following: 

• The primary drivers of the eurozone’s economic recovery
• The turnaround in individual countries’ current accounts
• Sectors best positioned to harness the recovery, without offering undue exposure to risk


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