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Application provision

1.1 If either Condition A or Condition B is met, this Part applies to a firm with a Part 4A permission that includes entering into a regulated mortgage contract as lender, except:

  1. (1) an EEA Firm with respect to an activity carried on in the UK under an EEA right; or
  2. (2) a firm with a Part 4A permission that includes effecting or carrying out a contract of insurance as principal.

1

Application and Definitions

1.1

01/10/2014

If either Condition A or Condition B is met, this Part applies to a firm with a Part 4A permission that includes entering into a regulated mortgage contract as lender, except:

  1. (1) an EEA Firm with respect to an activity carried on in the UK under an EEA right; or
  2. (2) a firm with a Part 4A permission that includes effecting or carrying out a contract of insurance as principal.

1.2

01/10/2014

This Part applies to an overseas firm only in relation to activities carried on from an establishment in the UK.

1.3

01/10/2014

firm that is a parent undertaking must ensure that a subsidiary undertaking, which meets Condition A or Condition B, complies with the requirements of this Part in relation to activities carried on from an establishment in the UK, as if it were a firm subject to those requirements.

1.4

01/10/2014

1.3 does not apply in relation to a subsidiary undertaking that:
  1. (1) is an EEA firm with respect to an activity carried on in the UK under an EEA right;
  2. (2) is a firm that is otherwise subject to this Part;
  3. (3) is a firm with a Part 4A permission that includes effecting or carrying out a contract of insurance as principal; or
  4. (4) does not have a Part 4A permission which includes entering into a regulated mortgage contract as lender.

1.5

01/10/2014

Condition A is that in the set of four consecutive quarters ending on 30 June 2014, the firm has entered into regulated mortgage contracts under which the total credit provided is or exceeds £100 million, but Condition A is not met if the firm entered into less than 300 regulated mortgage contracts in that period. 

1.6

01/10/2014

Where Condition A is met this Part applies from 1 October 2014.

1.7

01/10/2014

Condition B is that during both of two consecutive sets of four quarters the firm has entered into regulated mortgage contracts under which the total credit provided in each set of four quarters is or exceeds £100 million, but Condition B is not met if the firm entered into less than 300 regulated mortgage contracts in each of those sets of four quarters.

1.8

01/10/2014

Where Condition B is met, this Part applies from the start of the second quarter following the end of the final quarter relevant to the determination that the firm meets Condition B. 

1.9

01/10/2014

This Part ceases to apply (until Condition A or Condition B is met) if during both of two consecutive sets of four quarters:
  1. (1) the firm has entered into regulated mortgage contracts under which the total credit provided is less than £100 million; or
  2. (2) the firm has entered into less than 300 regulated mortgage contracts 
in each of those sets of four quarters.

1.10

01/10/2014

In this chapter two consecutive sets of four quarters means:
  1. (1) a second set of four quarters ending on 30 September 2014 or on the last day of each subsequent quarter; and
  2. (2) a first set of four quarters ending on the last day of the immediately preceding quarter.

1.11

27/02/2017

In this Part the following definitions apply:
 
 
means the cash loan provided by a firm under a regulated mortgage contract:
    1. (1) at the time the regulated mortgage contract is entered into; or
    2. (2) drawn down at a later date.
first charge
 
means a legal mortgage ranking in priority ahead of all other legal mortgages (if any) affecting the land in question
 
 
means a regulated mortgage contract under which the credit provided by a firm to an individual, or to individuals jointly, is or exceeds a multiple of 4.5 times the individual’s income, or the individuals’ joint income, at the time at which that income is assessed by the firm for the purpose of entering into the regulated mortgage contract.
 
 
means the gross annual income, before tax or other deductions, of an individual taken into account by a firm to calculate the credit it will provide under a regulated mortgage contract.
 
 
includes a legal charge and, in Scotland, a heritable security.
 
 
has the meaning given in the PRA Handbook.
 
 
means any of the four calendar quarters of each year, the first quarter beginning on 1 January. 
 
 
means a regulated mortgage contract under which the amount of credit provided does not exceed that outstanding to the firm, or to a different lender, under a previous regulated mortgage contract, or any other type of contract under which the obligation to repay the credit provided is secured by a legal mortgage on land. In determining the amount of credit provided, no account shall be taken of:
    1. (1) arrangement fees;
    2. (2) professional fees and costs; and
    3. (3) administration costs.

has the meaning given in Article 61(3)(a) of the Regulated Activities Order, but:
must be disregarded.
 
 
means, in relation to a quarter, the quarter and the three consecutive quarters preceding it. 

2

High Loan to Income Allowance

2.1

27/02/2017

Unless 2.3 or 2.4 apply, a firm must ensure that by the end of each quarter in which this Part applies the number of high loan to income mortgage contracts it enters into in the relevant period does not exceed 15% of all regulated mortgage contracts it enters into in that relevant period.

2.2

01/10/2014

A firm that is part of a group may allocate all or part of its high loan to income allowance to any member of the group.

2.3

27/02/2017

A firm that has allocated any part of its high loan to income allowance to another member of the group must ensure that the number of high loan to income mortgage contracts it enters into in the relevant period does not exceed the amount specified in 2.1, as reduced by the amount of the high loan to income allowance it has allocated under 2.2.

2.4

27/02/2017

A firm that is part of a group must ensure that the number of high loan to income mortgage contracts it enters into in the relevant period does not exceed the amount specified in 2.1, plus any high loan to income allowance allocated to it under 2.2.

2.5

01/10/2014

firm must keep a record of any part of a high loan to income allowance it has allocated or received. 

2.6

27/02/2017

In this chapter, a high loan to income allowance is the number of high loan to income mortgage contracts a firm may enter into in the relevant period in compliance with 2.1 without the modifications in 2.3 or 2.4 applied.