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Regulation and professional mortgages

This article is part of
Guide to Professional Mortgages

There is no difference in the advised sales process for a professional client as there is for a normal mainstream deal. The regulatory requirements for advising on a professional mortgage are the same.

It was initially thought that because of the characteristics of this type of employment they may be more likely to fall into the high-net worth category. The MMR allows lenders to apply a more tailored approach for such borrowers regarding affordability, lending into retirement and interest-only rules, and also allows clients to opt out of advice and proceed on an execution-only basis.

However Christine Newell, partner manager of Paradigm Mortgage Services, says this has not been the case.

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Ms Newell says: “Many of these professional people will not know that there are specific types of mortgage schemes for their profession with more flexible approaches so most of these clients have welcomed the advised process and are keen to get the best possible outcome for their own situations.”

David Hollingworth, head of communications of London & Country, says professional mortgages were never a huge product area but since the Mortgage Market Review the stretch of loan-to-income multiples has been reduced.

He says: “It always was niche. Rather than it being short hand for potentially stretching further on income multiples, which perhaps it was at one time, you now can’t sidestep affordability.

“Now it is about offering a slightly more flexible approach to how you evidence income and how well you understand the make-up of that income so that you can meet affordability criteria rather than just trying to push further.

“One lender used to offer as much as 100 per cent and even offered an unsecured loan on top of that to professionals. You could get to 110 per cent. That has all gone by the wayside now.”

As with any mortgage, Alex Hammond, head of marketing communications at Kensington, says the regulatory onus is on getting the right product for the applicant’s individual circumstances.

These “circumstances” include the individual’s income and outgoings as part of a full affordability assessment.

Mr Hammond says this means looking beyond rate and understanding the different criteria of different lenders.