As we pointed out on 21 January, those wanting a mortgage will be subjected additional financial scrutiny under the new “affordability tests” imposed by the Financial Conduct Authority which come into force at the end of this week called the Mortgage Market Review. Many lenders have already been slowly introducing the procedure since our first article.
Under the new regime, lenders will carry out a thorough “forensic” investigation of a borrower’s finances. An initial mortgage assessment at a branch could last as long as two hours according to Halifax and Santander. Lenders will want to know more details about borrower’s day to day finances, including, how much they earn, spending on food and utility bills every month, gym membership, mobile phone contracts and the size of any existing debts.
The Daily Mail reported this week that three Persimmon directors are in line to receive a staggering £100 million pay windfall. This is part of a £400 million bonus pot linked to a long-term incentive plan equating to around 10% of Persimmon’s market value.
To qualify for the huge payout, Persimmon must give shareholders 620p in dividends between now and 2021. The rewards plan 2012 – around 30million shares in Persimmon, will pay out to several directors. Chief executive Jeff Fairburn, finance director Mike Killoran and southern regional director Nigel Greenaway all stand to share around £100 million. To qualify for the payment, Persimmon must pay certain dividend amounts by the end of 2015, 2017, 2019 and 2021. For 2015, the required amount is 170p. The firm has already declared dividends of 145p and has announced an intention to pay 95p in 2015. So job done for the first tranch of shares! If any biennial target is missed the scheme folds, although they will be able to keep any shares already secured from achieving earlier targets, but they will have to pay to get their shares. If all the targets are met by 2021, they get the shares for free.
Persimmon say the scheme was drawn up when the share price was 620p and that the directors would have to double the size of the company in ten years to benefit. A spokesman for Persimmon told the Daily Mail:
“The analysis simply assumes that the share price in 2021 will be the same as it is today and ignores the challenge of returning £1.9billion to shareholders, while simultaneously growing the business to deliver an increase in the ex-dividend share price performance period of almost ten years……..This is a long term plan which is designed to drive outperformance through the housing cycle and there remains a very long way to go”