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Partial opt-out for business borrowers

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The FSA will allow mortgages, remortgages or further advances used solely for business purposes to be sold on an execution-only basis.

In its December consultation paper, the FSA proposed reading across the majority of the mortgage market review proposals to regulated mortgage contracts for business purposes.

In its final rules, published last week, the FSA says it recognises the full package of MMR proposals is not workable for business lending, with business borrowers generally having higher levels of financial capability than consumers.

As a result, loans solely for a business purpose on a customer’s previously unencumbered home and further advances and remortgaging for a business purpose can be taken out on an execution-only basis.

The FSA will also allow the loan to be repaid from the resources of a business or the personal resources of a borrower if funds are being raised for a new business venture.

The regulator will require a lender or adviser to have sight of a “credible business plan” before determining whether the loan is solely for a business purpose. The FSA’s interest-only rules will also apply.

Enness Private Clients director Hugh Wade-Jones says: “It is good to see the FSA is making the path for entrepreneurs easier.”

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