18 Skyline | Edition 3 | Winter 2021
So , with all this in mind , what else could mortgage firms and their respective advisers be assessing as potential alternative income streams should the residential mortgage market become more challenging in 2022 / 23 ? Let ’ s look at three potential additions to your advice proposition and consider the main FCA permissions factors that would apply :
Buy-to-Let
You should certainly check your existing FCA permissions for ‘ Consumer Buy-to- Let ’ and if you do not currently have these you should consider whether you will need them or not .
The Mortgage Credit Directive Order 2015 defines a Consumer Buy-to-Let ( CBTL ) mortgage contract as ‘ a Buy-to-Let mortgage contract which is not entered into by the borrower wholly or predominantly for the purpose of a business carried on , or intended to be carried on , by the borrower .’ i . e ., unintentional landlord .
1 Either the borrower or a relative has lived in the property since it was purchased ; or
1 At the time of purchase , the intention was not for the property to be let out ; or
1 The property was inherited , rather than purchased
So if you wish to be able to give advice in this area , then you would have to apply to have permission to write :
1 Consumer Buy-to-Let business 1 Consumer Buy-to-Let arranger 1 Consumer Buy-to-Let adviser
And the cost of this is ALWAYS £ 100 and should take approximately 48 hours to come through .
Also , you will need to consider if you would like to recommend and conduct debt consolidation via a BTL contract and if so , you should have Debt Counselling permissions with the limitation that this be limited to :
Counselling-no debt management plans
The cost of this is currently £ 500 and should take approximately 12 weeks to come through .
Lastly , some BTL providers will want firms to have Credit Broking permissions and this costs £ 300 and will take approx . 12 weeks to come through , but please note that if both Credit Broking and Debt Counselling is required , then you just pay for the higher amount ( i . e ., £ 500 ) and not £ 500 + £ 300 .
Commercial Mortgages
Credit Broking permissions as noted above are potentially handy to have if you are looking to expand into commercial mortgages . You would definitely need this if you are planning on recommending commercial mortgages to an individual rather than a Ltd Co . You should therefore consider who your potential target market is beforehand , as the potential three month turnaround on permission variations could impact your ability to place business in the short term .
Later Life Lending / Equity Release
The main consideration here is the level of service that firms wish to offer and confirm to their customers – Independent or Limited .
If a firm wishes to be considered ‘ independent ’ in this advice space , they will need to be able to recommend all equity release products and so it will be necessary to hold Home Reversion permissions if not held already . Once again , there is a charge for this additional permission from the FCA of £ 250 .
If you are happy to offer a ‘ limited ’ proposition and only advise on lifetime mortgages , then there would be nothing to change as the ability to advise and recommend these products are included within your normal mortgage permissions . The same would apply to RIOs ( Retirement Interest Only Mortgages ).
Clearly , with all three advice areas , you will have time and cost considerations and I would suggest asking , is the potential additional revenue going to be worth the additional permissions ? We then also have the additional T & C , supervisory and monitoring issues to consider , but that this clearly for a future compliance article !
A final PII thought
With the contraction of the PII market for mortgage intermediaries ( remembering that in the last four years the providers in this sector have reduced from fifty two to five ), many providers are not responsive to taking on ‘ new risk ’, so it is therefore imperative that firms keep their insurer appropriately informed of any changes to the business during the policy term . This could be anything that would be relevant in order to underwrite the policy – indeed it could well be required as part of your insurance terms and conditions . In particular , please think about updating your PI insurer on :
1 Material changes to the business ( management / focus of future new business )
1 New advisers 1 Income projection changes 1 FCA permission changes
If firm ’ s do not keep their insurer appropriately informed , you run the risk of potential claims not being covered and renewal terms being more difficult to access .
If you have any queries relating to any of the points raised in this article , please contact the Compliance Helpdesk on 01484 439120 to discuss your plans further .
Sources : 1 . www . handbook . fca . org . uk / handbook / ICOBS / 5 / 2 . html 2 . www . handbook . fca . org . uk / handbook / PROD / 4 / 3 . www . handbook . fca . org . uk / handbook / ICOBS / 2 / 5 . html