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R K

F C A Loan To Income Guidance Changes - Get Outs For The Wealthy

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http://www.fca.org.uk/news/fg14-08

It appears FCA have bowed to pressure from private banks and lenders to high net worth individuals. That's my interpretation, which may be incorrect, so have a read and see what you think

Summary of feedback

The main feedback issues were:

  • impact on the ability of private banks and wealth managers to provide regulated mortgage contracts to high net worth individuals (HNWI)
  • impact on competition – specialist firms will be harder hit than those that are part of larger (banking) groups
  • the guidance was open-ended and suggestions for a sunset clause or a review date to be included
  • the scope of the recommendation – the inclusion of buy to let or bridging loans
  • the definition of a ‘quarter’ for the purposes of data collection.
  • the treatment of mortgages ported from one property to another with no increase in the principal borrowed
Response to feedback

We have been liaising with the PRA to ensure that our guidance is consistent with their rules:

  • we are going to set a threshold of a minimum number, as well as a minimum value, of mortgages that a firm has to write before it is expected to apply the LTI limit
  • a firm that is part of a group may allocate all or part of its high LTI allowance to any other member of the group.
  • the LTI limit applies to all regulated mortgage contracts, as defined in the Regulated Activities Order 2000. This will include some bridging loans and a very small amount of buy-to-let lending that fall within that definition. It will also include mortgages ported from one property to another regardless of whether or not there is any increase in the principal borrowed
  • the quarters used to assess whether a firm is above the £100m threshold and whether a firm exceeds the 15% LTI limit will be the same as those defined in Product Sales Data, subject to the consecutive sets of four quarters being on a rolling basis

As a result of representations received, we have amended our guidance to:

  • show that firms have to write a minimum volume, as well as a minimum value, of mortgages over four consecutive quarters before they are expected to apply the LTI limit
  • allow the application of the LTI limit to be at group, rather than regulated entity, level

There's always a get out for the wealthy after all.

Call me a cynic but they've published this on the rather busy media day of the Tory party leader's speech.

Edited by R K

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There's always a get out for the wealthy after all.

Call me a cynic but they've published this on the rather busy media day of the Tory party leader's speech.

If they're so 'wealthy' why do they need mortgages at all?

Perhaps to pull in the last of the dumb money all the way down. Got to laugh when I see people in their 50s, having seen epic HPI on their own house, buy an elderly downsizers house across the way at £2.35m, using private bank in Channel Islands.... put it on rental market, and it's sat there 1.9% yield, 40+ days of rent. That private bank must be laughing; high-net-worth couple putting themselves on hook, with 2 prime properties to go for.

There's some of your high-net-worth wealth, pulling in, and taking out on the way down. No wonder one high profile US bank has recently been reported to have a cavalier attitude towards some high-net-worth individuals they've been 'helping'.

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http://www.fca.org.uk/news/fg14-08

It appears FCA have bowed to pressure from private banks and lenders to high net worth individuals. That's my interpretation, which may be incorrect, so have a read and see what you think

There's always a get out for the wealthy after all.

Call me a cynic but they've published this on the rather busy media day of the Tory party leader's speech.

I think it is a fairly sensible policy. To be an HNWI you need an income over £250k.

The FCA is in place supposedly to look after the consumer. The HNWI crowd meant to be rich enough to afford mistakes.

This is akin to putting caps on fixed odds betting machines while leaving the Monte Carlo casinos open to the rich.

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http://www.fca.org.uk/news/fg14-08

It appears FCA have bowed to pressure from private banks and lenders to high net worth individuals. That's my interpretation, which may be incorrect, so have a read and see what you think

There's always a get out for the wealthy after all.

Call me a cynic but they've published this on the rather busy media day of the Tory party leader's speech.

I read it the same as you RK. The rich get first but soon there will be way around MMR for every body. Published on a day when we're all too busy watching Cameron raps to notice. Realistic not cynic..

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I think it is a fairly sensible policy. To be an HNWI you need an income over £250k.

The FCA is in place supposedly to look after the consumer. The HNWI crowd meant to be rich enough to afford mistakes.

This is akin to putting caps on fixed odds betting machines while leaving the Monte Carlo casinos open to the rich.

Risk? Lol, they're snagging a competitive advantage.

Risk is so 2007.

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There is not definition of HNWI. Banks could use this to avoid the MMR on a certain amount of lending. They'll use this classification in two ways, allowing high LTV whilst being able to treat that business outside their normal guidelines in the event of default.

I see some Northern Rock style lending with the obvious economic fallout to the fools entrapped.

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There is not definition of HNWI. Banks could use this to avoid the MMR on a certain amount of lending. They'll use this classification in two ways, allowing high LTV whilst being able to treat that business outside their normal guidelines in the event of default.

I see some Northern Rock style lending with the obvious economic fallout to the fools entrapped.

Actually there is a legal definition of HNWI in the FCA handbook. It is used for various eligibility criteria for marketing financial products and investments.

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I read it the same as you RK. The rich get first but soon there will be way around MMR for every body. Published on a day when we're all too busy watching Cameron raps to notice. Realistic not cynic..

If the banks want it, it is something to be avoided.

These firms are in the business to increase their Net Wealth...which in reality is based on paper values and not much else.

If you are going to rob someone, it should be someone with something worth stealing. Banks want money...

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