New bonus rules would make large mortgages hard to get

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32% of IFAs say that their clients are expecting at least half of their bonus for the 2010/2011 tax year to be paid in cash or deferred cash with the remainder likely to be paid as shares or share options, according to research from Investec Specialist Private Bank.

However, Investec warns that many of those people who accrue irregular or unconventional income through lump sum, equity based bonuses will struggle to have loan facilities such as mortgages agreed by some mainstream banks which have less flexible lending criteria.

Investec says that FSA proposals that 50% of bank bonuses should be paid in shares, share-linked instruments or via equivalent non-cash routes, could make it more difficult for many of these individuals to secure large mortgage loans.

Whilst 8% of IFAs questioned said their clients are expecting their bonus to consist almost entirely (91-100%) of cash or deferred cash, a further 28% understand that cash will account for less than 10% of their clients’ bonus payments this year. Investec warns that these individuals could be penalised when it comes to applying for large mortgage loans as many banks will look at the value of a clients’ property rather than their income and overall assets.

Jack Jones of Investec Specialist Private Bank, said: “These findings show that while cash is still likely to feature bonus payments this year

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