The firm welcomed the exemptions for wealthier clients proposed by the regulator, although the FSA defined HNW clients as having a gross income of between £1 – £3m a year.
The FSA suggested lenders would need to get a declaration from a professional, like a lawyer or accountant that states the individual meets this definition.
Under the proposals, HNW borrowers would be the only type of borrowers still allowed to be assessed on an interest-only basis providing there is a realistic and credible strategy for repaying the capital, it said.
Enness called the proposals “balanced and coherent,” adding those with large portfolios of assets should be shown more favourable lending terms than others relying on income alone.
However, the firm called the FSA definition of high-net worth slightly high, citing the consumer credit act’s bracket of £150,000 of income or £500,000 of net assets. Enness acknowledges that the CCA amounts may be small for the purposes of large mortgages but would like to see the FSA align itself more closely with the CCA figures.
Hugh Wade-Jones, director of Enness Private Clients, said: “We are certainly not advocating lending to individuals without any income but if we have someone whom, under normal mortgage rules, has a non-standard income yet can put down five years’ worth of mortgage payments on account on day one, then we believe they should be viewed as an equally secure lending prospect as someone borrowing on the back of their income alone.
He added the regulator’s willingness to waive the affordability assessment on a capital and repayment basis for wealthy borrowers is also a good idea.
“Individuals who fall into the HNW bracket will often have non-standard income structures and as such they may not want to be forced to commit to large monthly payments particularly when they may have large amounts of investments or stock maturing in a few years’ time which will be used to clear some or all of the debt.
“We work with a variety of private lender banks that offer loans on a five-year term, which would obviously mean that the standard check of whether a mortgage is affordable on a capital and repayment basis is nonsense. In the land of 25-year terms, the five-year product might seem restrictive however we believe it should become more widespread as it allows for more regular reviews of the borrowers’ circumstances, rather than leaving them to it for a quarter of a century,” said Wade-Jones.
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