Robin Hood was famous for robbing the rich to give to the poor and
you could be forgiven for thinking that today the very wealthy were
attempting the reverse that situation when it comes to securing the best
mortgage deals. It appears that there is one set of rules for some and a
different set of rules for others, with wealthier borrowers now being
exempt from certain legislation and criteria imposed on mainstream
borrowers. However taking a ‘one size fits all’ approach to lending
really benefits no-one and the main point of regulation is to protect
the best interests of each individual client.
The Mortgage Market Review focuses on “Treating
Customers Fairly” and trying to hard wire a more conservative, but
common sense, approach to all areas of lending. However, some of the
changes are indeed a bonus for high net worth borrowers.
Firstly, entrepreneurs (business people borrowing against their homes)
will enjoy far more flexible criteria and even be able to ‘opt out’ of
standard affordability checks providing they can offer a credible
business plan. However, if banks remain unwilling to lend then more
traditional alternative funding routes typically used by entrepreneurs
may still be the quickest and simplest option.
Secondly, High
Net Worth (HNW) individuals, which are typically classed as those
earning upwards of 300,000 per year in the UK or those that have a net
asset base of 3,000,000 or more, can also enjoy a greater degree of
flexibility and be able to opt out of standard criteria tests when
borrowing a mortgage. The exemption for High Net Worth (HNW) borrowers
from stringent affordability criteria provides lenders with the
opportunity to be flexible when regular checks are not relevant for
certain categories of clients. Many HNW clients have a high level of
complexity with regards their income and assets. Many have irregular
income but their personal or family wealth is so vast that a standard
affordability check are effectively pointless as the risk to the bank or
other lending institutions is minuscule.
All things considered, the Mortgage Market Review willingness to show a
reasonable degree of flexibility for high net worth individuals must
surely be welcomed by all; both by the borrowers themselves but also by
the lenders, which have been freed from irrelevant legislation in
certain circumstances.
Obviously no one wants to see a return to
the days of the overly-easy credit available with minimal checks,
before the global financial crisis. This was one of the main reasons for
the economic predicament in which we now find ourselves embroiled in
the UK, Europe and the USA. But sensible lending does not have to mean
that checking the credit worthiness of a large mortgage borrower can be
done effectively by purely a box ticking exercise and disregarding
anyone who does not fit a particular profile; some common sense must
always be brought into the equation. This is good news for high net
worth mortgage borrowers as a whole and finally a common sense approach
has developed in the mortgage market that has been lacking for too long.