‘MMR £1m threshold for high net-worth too high’
Wealthy people should be exempt from the FSA’s mortgage market review because of the “complex nature” of their finances, a director of Enness Private Clients has said.
Responding to CP11-31, the FSA’s latest mortgage market review paper, Hugh Wade-Jones said he welcomed the regulator’s proposals for a more tailored and alternative approach for high net-worth borrowers.
In its submission to the FSA consultation, Mr Wade-Jones said Enness was “fully supportive of the approach which places high net-worth borrowers outside the normal rules and regime”.
However, Mr Wade-Jones said there still needed to be some guidelines in place to make customers more “comfortable”. He also said the FSA’s proposed £1m annual income threshold to define high net-worth was too high.
In addition, he said individuals who work in certain financial sectors and hold specific qualifications, such as an ACA qualification, may also be exempt from the rules as they will have financial knowledge to make an informed decision.
Mr Wade-Jones said: “There are a few areas where we believe greater clarity is needed. In particular around what constitutes the definition of a high net-worth borrower.
“We believe £1m annual income is too high. Plus the employed tend to be heavily bonus-led which increasingly includes stock and other incentive schemes. It needs to be made clear whether this would be included as income.”
Craig Taggart, head of mortgages for London-based IFA Baigrie Davies, said: “I do agree the £1m figure to define high net-worth is probably a little too high, but a line needs to be drawn. This part of the MMR is mainly geared towards private banks, which probably do more responsible lending than anyone else.”